ECO.6:5.1 - Dedicated tooling or a more expensive standard process

A constructed service venture requires a supplier to make €20,000 of tooling that has only €2,000 of resale value. The proposed customer can cancel after a month; future volume is uncertain. The supplier’s quoted unit price assumed recovery over a year. A cheap first-month offer does not describe the supplier’s exposure after cancellation.

One alternative is a minimum-payment commitment or staged investment that both parties can accept. Another uses a standard process costing €3 more per unit without dedicated tooling. At a possible first order of 2,000 units the added processing cost is €6,000. The €18,000 difference between tooling cost and resale is the initial exposure before any recovery through customer payments. Compare the alternatives over the same intended service and period, retaining who bears each cost and how much investment has already been recovered.

Suppose the required surface quality can be obtained only with the dedicated process. Both parties can support the investment and choose supplier-owned tooling with an identified recovery amount in each payment. Under their available agreement, the customer can cancel future volume but must settle the unrecovered tooling cost, less resale proceeds. The customer’s purchasing manager can exercise that option; the supplier handles resale. Changes in specification require a separate agreement rather than following automatically from the cancellation right.

After the first month, €4,000 has been recovered. Demand falls and the customer no longer needs the remaining volume. With a buyer available for the tooling at €2,000, the purchasing manager chooses cancellation and pays €14,000: €20,000 − €4,000 − €2,000. The supplier sells the tooling, completing recovery of its investment; OPS can then reassign released capacity. The arrangement preserves the required quality while making this volume change possible. Reopen it if the parties cannot support the settlement, resale changes or a different disturbance falls outside these terms. The example assumes those commitments are available and does not establish their legal enforceability in another setting.

If a new interface instead makes the tooling readily reusable, the dependence may shrink enough for ordinary purchasing.