Newsletter, Issue 2, November 15, 2024
By Marshall Taylor
With slight trepidation, I feel like I am giving away the farm on this one. As a supplier, I am going to disclose methods for buying components at a discount.
Like the manufacturing customers we serve, suppliers are also in business for profit. Along with factors including passion for the industry, desire to provide for our faith, family, and community, and personal satisfaction in serving our customers, there is an obvious goal of financial gain.
I believe understanding this premise helps customers and suppliers alike appreciate the symbiotic relationship between them. One cannot exist without the other!
The reason I'm sharing this information is simple: If the customer is thriving, then their supplier can thrive, and vice versa.
There are many ways that customers can impact the cost of the products or services that they buy, but let's look at five of them regarding supplier relationships.
Communicate regularly with suppliers
We all know that effective communication is vital to any relationship, and there is no difference regarding your suppliers. Most suppliers desire to be loyal to their customers, which is fostered by clear communication. Be candid about your expectations. Invite suppliers to see your operation so they understand your requirements. Give your supplier feedback: how does their pricing compare to others, why did they win or lose a quote, and what components do they usually have an advantage on? I am not suggesting sharing a competitor's quote to create a bidding war. Rather, I suggest giving a range or percentage they were above or letting them know if they were completely out of the ballpark. Suppliers can then evaluate what their niche is and possibly reevaluate future pricing.
Fewer suppliers, consistent orders, larger volumes
There are inherent discounts in volume pricing. Some associated cost savings are obvious, like amortizing fixed setup fees over several units; others are less obvious, such as the reduced labor force required to manufacture production volumes vs. bespoke components. When a company keeps a shorter list of suppliers and provides them with steady work at higher volumes instead of having them race to the bottom of the barrel on every quote, it reduces overhead for both parties and allows suppliers to extend deeper discounts.
Don't beat suppliers down on pricing
Buyers and supply chain managers must seek the best value, which includes competitive pricing, quality, lead time, reputation, and customer service. Sometimes the absolute lowest price is the most critical factor for a part (like a washer or a screw), but usually, it is a combination of all the above. As previously mentioned, suppliers must turn a profit to stay in business. Be sure to assess the fair value of the product or service you seek. You might even consider telling your supplier your target price, so they don't spend time on a quote that won't even be close to what is acceptable.
Issue a PO for time and material
If you ask for expedited prototypes, consider skipping the quote and sending a PO with T&M pricing. Often, a supplier is willing to bend over backward for their customer, but overtime and other unforeseen costs require "padding" the price. T&M allows a customer to only pay for the actual cost instead of markup for buffer. It also saves time by eliminating the quoting process and gets your parts in process sooner.
Pro-tip: Ask for a (reasonable) discount
I hesitate to share this because I know some manufacturers will use it without discretion. Unlike walking into the grocery, where you probably won't get to finagle the cost of a gallon of milk, manufacturing business owners can consider fair counteroffers. Use this tactic sparingly and only if you have an established relationship with your supplier and have given them "good" and consistent work. Be reasonable, maybe 1-2%, and again only if necessary. Most suppliers can find a way to squeeze a quote if it means winning the job, especially for customers that they enjoy working with.
Would you like to meet us? Please call us at (208) 748-6600 or email sales@marvelmanufacturing.net.
About Us
At Marvel Manufacturing, we understand that each project is unique. That's why Marshall Taylor, with 20 years of experience, provides personalized quotes, ensuring that your specific needs and high standards are always met. We are committed to meeting and exceeding the high standards of quality, precision, and reliability that customers expect. We offer precision CNC machining and a variety of finishing options. Reionda Taylor, a seasoned CPA, oversees accounting and financial operations.
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