John Packard Talks About Lessons Learned Part I

Recently I was asked to reflect on my 45 years in the steel industry and to provide some insights as to what were the most important lessons I learned over my career.

The simple response is to say honesty is the key to success.

Honesty, after all, is a moral choice. I have found one sleeps better at night, and ultimately one does better at business, by being honest and letting the “gray” business go elsewhere.

There are times when you are confronted with problems that define who you are, and ultimately your relationship with your customer. It doesn’t always go the way you think it should.

I think one of the most important lessons I learned is depicted in the following true story.

Early in my career with Pacesetter Steel, I handled several HVAC (heating, ventilation, air conditioning) companies. I had one customer who I had become personally close to. We had a special relationship. The two partners and their wives attended my wedding, and when I was in town to visit them, they went out of their way to make sure we did something special.

As a customer they were the best kind – consistent buyers of as many as 10-15 truckloads of steel monthly. I supplied most of the steel they purchased.

This went on for a couple of years before I noticed their tonnage beginning to wane. What was once 10-15 truckloads had dropped to 5-6 truckloads. Yet their overall business continued to boom.

I asked them why their tonnage had dropped, and they told me a competitor had come in and undercut my prices. In some cases, the prices were as much as 10 percent below our quoted numbers.

This concerned me in a couple of ways. First, I was surprised they did not inform me when they got lower offers so I could adjust my prices or determine what I needed to do to compete. Second, since we were one of the largest sellers of prime galvanized, I realized something fitting in that “gray” area must be in play for our company to be so uncompetitive.

I suspected that the competitor had adjusted the billing method from actual weight to nominal weight. By moving to nominal weight (which is a theoretical calculation), they were able to lower the per hundredweight pricing. The result: when compared against someone quoting actual scale weight, it appeared their prices were lower.

I asked one of the owners (who bought the steel) to give me four or five random coils with the gauge, width, and linear footage. On purpose, I did not ask for the billing weight of the coil.

As I suspected, when I ran the calculations using the nominal density factor for each coil provided, I was able to accurately calculate the billing weight of each coil on his invoice. The competitor had switched the billing method without advising the customer in order to secure the business.

I remember sitting back in my office chair and thinking to myself, what do I do now? If you were in my seat, what would you do?

Sure, it’s easy to say they have been duped by my competitor. But isn’t that just another way of telling your buyer that he is stupid for letting this happen? What happens to our relationship once I inform him of his blunder?

The buyer was a good man. An honest man. He didn’t weigh his steel, and, in the process, he became susceptible to being taken advantage of. Innocence lost.

I provided the tools necessary for the customer to do the calculations on his own. In the process, he discovered there were many truckloads of steel where the steel was billed on a nominal weight basis. The other supplier returned a large sum of money to the customer, but the relationship between us changed. After all, it was I who raised the veil and took away his innocence.

You would think I would have been treated as a hero. For a few months, the customer came back and was buying 10-15 truckloads monthly as before. But it wasn’t too long before the competitor was able to worm their way back as a supplier.

I didn’t understand right away. There are those who want to believe that what they hear is the truth. Those who provide information that differs from their pre-conceived notion become the bad guy in this story.

As I look around the world today, there are many examples of those who believe the competitor’s “spin” – and providers of facts or differing opinions are now the bad guys.

Would I have done anything differently when confronted with a competitor who was misrepresenting steel to a customer? No, taking the moral high road is always the best route. Even so, understand that sometimes facts are not welcomed with open arms.

We are now 35 days before the start of the 2022 SMU Steel Summit Conference. This will be my last Steel Summit Conference, and I am looking forward to seeing as many of our readers, and some of my old steel customers, as possible. You can add your name to the list by clicking here.

As always, your business is truly appreciated by all of us associated with Steel Market Update.

John Packard, Founder

John@SteelMarketUpdate.com