Supply services with added value
02 January 2014
All too often, when negotiating with suppliers, industrial buyers focus almost exclusively on price. This can be both short term and potentially counterproductive, says Julia Mullar, new business manager for ERIKS OnSite Solutions.
Fitting a low cost component may save money today, but when it fails unexpectedly or only lasts half as long as a slightly more expensive part, then the true business cost, in terms of replacement and downtime, can be considerable.
Price should be the last part of any negotiation, not an opening gambit. Of greater value to the business are value added services that many industrial suppliers provide, often as part of a package or at zero added cost. For example, inventory optimisation can significantly reduce costs for the business, as well as improve operational efficiency, and the closer the relationship with your supplier, the bigger the saving.
Rather than the traditional method of getting three price quotes on each item when buying parts, a close, one-supplier relationship cuts sourcing and purchasing time, enabling engineers to get on with engineering. A close relationship also improves operating efficiency at large because the supplier develops a thorough knowledge of the plant. This prevents the overstocking of MRO stores, which ties up finances in the holding of slow-moving or, in some cases, irrelevant items from an outmoded spares list. It also identifies where stocking may be unnecessary because parts can be more efficiently sourced at speed by your supply partner. In short, a solutions provider acts as a consultant as well as a supplier, delivering reduced stockholding and refining the contents of the storeroom through the application of expert knowledge.
E-commerce is a powerful force for optimisation, especially now that it offers a cost-effective and sustainable option for lower levels of supply than the hundreds of weekly orders that were once required to justify the expense. An early adopter of EDI was Ford, and the first MRO supplier to establish an EDI connection with Ford in Europe was ERIKS, in the early 1990s. Since then, the systems have simplified, the set-up costs have shrunk, and ERIKS' experience has grown enormously. Now Ford makes several million pounds of purchases annually via e-commerce, and recently instigated a new contract from Ford in Germany to purchase from the UK – set-up by ERIKS in just five weeks.
By acting as a consultant as well as a supplier, we can reduce stockholding by saying, ‘Actually, you don’t need to stock this particular bearing or that particular belt because it is going to take you 8h to get to it in a machine and we can get them to you from our main stores within 6h.’ The benefits we offer through e-commerce are increasingly available to smaller businesses through the growth of the internet, and the increase in digital systems such as SAP. e-procurement can now be highly viable on a far smaller scale for any organisations that want to cut costs, minimise paperwork and increase purchasing efficiency.
There are many benefits to be embraced by establishing a closer relationship with a supplier, and so bargaining for the cheapest price does not always deliver the best return. In fact, the financial and operational benefits of partnering with a solutions provider such as ERIKS will reduce inefficiency in purchasing, give engineers more time to do what they’re best at, and deliver a whole series of added value services along the way.