A company manufactures components for an important large customer. That customer now specifies that all components need to be manufactured under clean room conditions. The company can’t afford to lose this customer but is at a loss as to how they should respond. How do respond to demands for expensive process upgrades?

Advice from the CEOs:

• Start with a discussion. Ask them exactly how clean production must be, and what their concerns are. You can also offer to perform destructive testing (at the customer’s expense) to demonstrate that your current processes meet their specs.
• Look at the overall cost of the clean room conversion versus your anticipated profits on the job. Make sure that your profits justify the conversion.
• Increase your prices to the customer based on the new requirement, and make sure that the increased price pays for your conversion at a minimum. If they ask why your prices have increased, explain that the process that they now demand is more expensive because of the costs of operating under clean room conditions.
• If the customer is a very large player and is doing this because of demands placed on them by their customers or regulators you may have little bargaining room other than complying and adjusting your prices accordingly.
• Consider a prefab clean room. Especially in high tech areas like Silicon Valley you may be able to find older rooms at a bargain rate. If you don’t have space in your current location or upgrades will be very expensive consider leasing new space for this job.

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