Atypical Supplier Shows How To Thrive

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I spent an awesome 45-minutes on the phone today with Johannes Schmoelz, sales manager, all around cutting tools guru and drag racing fanatic at K&Y Diamond, Ltd. K&Y is a unique Canadian manufacturer for a number of reasons, and its success offers all North American small- and medium-sized manufacturers (SMMs) some strong medicine in the way of inspiration. Not only for marketing and using - but how to grow and sustain a top-flight business, AND how to win work from foreign competition.

KYThe 'typical' about K&Y is that it is a cutting tools manufacturer. It has around 35 employees, and has been in business since 1976. But that's about where the "typical" ends, and the inspiration begins.

K&Y specializes in high-precision, custom tools for cutting and machining complex discrete parts for the optics and aerospace industries.  K&Y's wheelhouse is diamond & PCD/PCBN, and applications its tools are customized for include defense, medical, ophthalmology, and extremely high-tolerance machining. They are also specially designed for products made from titanium, aluminum, composites. Each tool-type is customized for materials and projects/products/applications according to ultra-rigid customer and specification demands.

Now, this may sound like a commercial - it's not. Because the space that K&Y occupies is the story here. And whether you're an member or not, this is a space where your business needs to either be or get to.

  • K&Y has carved its niche with diamond tools that are required for said ultra-rigid specs and applications. These are tools that are used to create parts so precise, that there's NO room for chatter. After it had carved out a leadership position in this space, it "drilled down" its experience and expertise in diamond and reapplied it into "lower end" products like PCD & PCBN tooling. By delivering high-value, customized applications to these other tools, it gave its customers a level of service that differentiates them from their competitors.
  • K&Y competes directly with the "big" cutting tool guys, like Kennametal, Sandvik, Seco, and Iscar. But while these highly esteemed companies offer primarily "off-the-shelf" commodity products, K&Y is all custom. And I mean ALL custom. As in, they won't have a tool for a customer until they find out what it's for. In applying the aforementioned techniques and service to the "commodity" side of the market, they allow themselves to compete head-to-head with them. While the "carbide side" may cost 1/3 of the K&Y price initially, quality and service more than make up for the total cost in product longevity. And accuracy. And ... service?
  • K&Y differentiates itself with service. It partners closely with its customers by further extending the life of its customized tooling through quick turn-around relapping (refurbishing) services, and by inserting itself closely into the engineering adjustments its customers throw at them. These efforts further assert value beyond the "standard" part.
  • K&Y's use of is remarkable as well. Instead of focusing on an RFQ or specific "event," it looks for prospects that match its profile of the ideal candidate - high-tolerence, industry-specific and quality-focused. This motive filters the "wheat from the chaf," and reduces the efforts to get work from Buyers that will likely not bear fruit. And for those that care, that's driving "Lean" principles into the marketing and sales cycles. Once K&Y identifies a  qualified prospect, it contacts regularly, but not frequently. "Buyers these days are a little stand-offish about calls," says Johannes. "It's a fine line, but if they match our profile it nearly always pays off."

Carve a technology-rich niche. Compete with quality and innovation, not quantity or price. Provide services around the part that distinguish you from competition. And market to the type of customer you want to work with - not to just anyone that will give you work. This is how North American SMMs can thrive. It takes guts and savvy and technical chops - but we already have that. We just need to focus.

Buyers today want to cut costs & improve their bottom line - just like you. And that's tough to do with off the shelf products for high-tolerance, high value parts (because there's not much room for process improvements). It's the same with discrete parts manufacturers - if tolerances are all you have to distinguish yourself, you're toast. Because the guy down the street (or across the ocean) has a Mori Seiki, too.

K&Y has reached the top of the pyramid, where margins are greater and competition is less fierce. It's not an easy place to be, but it beats the alternative.

Distinguish yourself through quality, service and innovation. And tell every Buyer you meet why and how you bring value. That's the K&Y way, and it works.

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