To buy right, you need to get comfortable with the purchasing process.
Purchasing the materials needed for projects – just like buying office supplies or parts for the company truck – is a daily requirement for any small business. We hear a lot these days about “partnering with suppliers.” It’s easy to snicker at the notion. Indeed, there are cases where snickering is too mild a reaction. But some suppliers actually recognize that their success is tied to yours.
As common as purchasing is, it shouldn’t be hard to get good at. In reality, purchasing at many small companies isn’t even analyzed in “good” or “bad” terms. That’s unfortunate, because with a little applied, systematic effort, purchasing can become a profit-enhancing practice – and vendors really can become a valued part of your extended team.
Buying materials for your business is like buying stuff for yourself. The more vigilant you are about getting good quality at a good price, the more likely you are to do so.
But why struggle? You’ve quoted a job based on certain prices, those prices have held and now, signed contract in hand, you’re ready to place your orders. You’re confident you can do the job as quoted, so why not buy your materials as quoted?
Because you’re way too smart for that.
Jump ahead a few weeks. The job is done, the customer’s happy and you actually did a little better on your labor estimate than expected. This earned you an extra three percent on the project, a tidy little sum you’re ready to put into the company’s “rainy day” fund.
BUT WAIT! Would that really be FAIR? Isn’t your conscience PLAGUING you? Shouldn’t you write out a check equal to the extra money you made and send it off to your customer with a note, “Your project cost less to do than we thought, so here’s the difference.”?
That’s what I thought.
As surely as you make more money when, at the end of the job, your labor estimate proves to have been a little too high, there also is money to be made on the front end, through buying smart.
Someone once said, “You charge what the market will bear, produce the product as economically as possible and what’s in between is your profit.”
Companies rationalize their failure to seek better materials pricing in all sorts of creative ways, but what it really comes down to is fear. They’re afraid of looking cheap or of getting a lower grade of material. Or maybe they’re just afraid to be talking about the numbers at all.
If we substitute the word “afraid” with “uncomfortable,” we really put our finger on it. These folks are simply uncomfortable with the purchasing process. The cure is to jump in with both feet.
There are people whose only job, all day, every day, is to find the best possible materials for their companies, at the lowest possible prices. So if you’re uncomfortable asking suppliers for a better number because you think you'll be the only one doing it, know this: You’re far more likely to be the only one who isn’t.
But what if your vendor sends a lower grade of material?
Since you can reject it at your loading dock, you need to let go of that discomfort as well. If your supplier is foolish enough to send, say, shop-grade material in place of first-quality stuff, you should not only reject it, but stop buying from him if he ever tries it again. Some partner!
Maybe you’re just uncomfortable talking price. Don’t be ashamed to admit it; it’s the most common reason people don’t ask for better pricing.
For many, there’s an underlying sense of intimidation connected to working with vendors. Not surprisingly, the fewer vendors they work with, the stronger that sense can be. After all, when your options are limited, you don’t want to limit them further by losing a supplier. So, what to do?
First, realize that no supplier is about to cut off a customer because they ask for better pricing. It is a basic part of doing business.
Put yourself in your supplier’s place. What incentive does he have to cut you a better deal? Well, he wants the sale, of course.
But what else is driving him? He wants all the customers he can get, right? Not exactly. He actually wants all the timely paying, low-risk customers he can get. Hopefully you’re one of those, and that’s already nudging him toward helping you out – but don’t be afraid to remind him of it.
What if this isn’t exactly a huge sale? Certainly, the size of the order is proportional to the vendor’s willingness to offer a discount. That said, there’s another way to “incentivize” a vendor into giving you the best pricing: GET MORE VENDORS.
The more options you have, the more likely you’ll be to find the best price in the market for whatever you’re buying, be it one sheet, one skid or one truckload. Having multiple suppliers makes the difference between negotiating for better pricing and begging for it.
As you become more comfortable with the process, you’ll soon be spotting price discrepancies your vendors miss.
It happens all the time, sometimes in your favor, sometimes in theirs. The only way to catch these errors consistently is by knowing what you’re buying, what it’s worth and what you agreed to pay for it. When you do spot a mistake, call your supplier and correct it immediately, no matter who benefits.
By paying more attention to purchasing, you’ll be doing both yourself and your vendors a favor – and that’s when vendors really do become “partners.”
Anthony Noel owned and operated Noel Custom Woodworking for 15 years. He is now a consultant helping custom shops with the business of woodworking. He has written for the magazine since 1994. Past articles are available at www.iswonline.com. Send him e-mail at [email protected].
I am the relatively new production manager at an architectural millwork company. I have the right equipment, a great crew and a supportive president. The shop floor is reasonably organized, but often cluttered with cuttings that are deemed “valuable” by some, mixed with old jigs.
My predecessor, who is still with the company, was more of the “My way or the highway” type of manager.
I am trying to implement some of the principles of Lean Manufacturing, in particular the idea of getting rid of things that you do not use day to day. I am not a big fan of the pack-rat mentality. My feeling is, if we need special items, it is easier and cheaper to order them and liquidate them after we’re done to avoid a “garage sale” scenario every couple of years.
Name and company withheld upon request
Thanks for writing!
I certainly hear you on the “pack-rat” thing and get the notion that you’re concerned your efforts to streamline things may meet with some resistance from “the old guard.” My stance: Too bad, do it anyway, they’ll get over it!
I’ve never understood that “Keep it, we may use it!” mentality. Granted, if it’s a half-sheet of something you’ll use tomorrow or next week, keeping it makes some sense. But even then, the argument can be made that you bought it for a specific job, the job is finished, the material is paid for, slice it up for kick material or counter buildup and move on!
Here are my suggestions:
For the old jigs, go in tomorrow and throw away any that you are ABSOLUTELY CERTAIN, WITHOUT ASKING ANYONE, are no longer in use. (Salvage any worthwhile items like clamps and other fittings before they hit the dumpster.)
Next, round up all the jigs you’re PRETTY SURE nobody’s using, but aren’t 100 percent CERTAIN. Line these up along a wall and call a meeting in that location immediately after first break. Ask everyone to check them out as they return to their workstations and to set aside any jig that THEY PERSONALLY HAVE ACTUALLY USED in the last six months. Salvage and toss all the others.
Then, assuming you actually have some jigs that folks are claiming they’ve used, mark the current date on the back with a Sharpie.
Now, put a note by the time clock so everyone sees it on their way to lunch, announcing a second gathering at the same place. Hold the meeting right after lunch or following afternoon break, whatever’s better for your schedule.
At this second confab, hold up one of the dated jigs and tell everybody that, whenever a jig WITH A DATE ON IT is used, the user MUST put the day/month/year date they use it and their INITIALS below your date, also in indelible marker.
Select a few people at random to repeat aloud what you’re asking of them, just to make sure everyone “gets” it:
“What are you gonna do?”
“Check the jig for a date and write the date I use it underneath, with my initials.”
Finally, go into your office and mark a date six months from now on your calendar with the word “JIGS.” Go back that day and check for newer dates, and toss any jigs that don’t have one.
Should you date ALL the jigs in the shop or just the ones you think are unused?
Well, the ones that are used regularly are probably not the clutter-causers you’re concerned with. Old jigs – and scrap materials, for that matter – are conspicuous by their very accumulation, and they accumulate ONLY because people are afraid of getting in trouble for throwing them out.
As the production supervisor, you have the authority to cut down on clutter, and you should, because if you don’t, at some point, the local fire marshal will insist.
As for scrap materials, institute a dating policy here as well. Set up a rack specifically for sheet scrap. Have employees mark the date and species (or color, if it’s melamine or a p-lam layup) on the edge, on the day it’s placed in the bin. Attach a Sharpie with a string or light chain to the rack specifically for this purpose.
Come up with a minimum acceptable size that’s larger than the actual useable size – for example, the finished end of a wall cabinet is 12-inch by 30-inch so you might want to make your minimum size 14-inch by 32-inch. (Stuff in a scrap rack takes a beating around the edges.) Be sure people mark the LONG edge of the scrap and stand it in the rack so that the edge faces out and is easy to read.
Now, assign one person to go through the rack twice a week: On Wednesdays, to be sure things are somewhat organized and not dangerously arranged; and on Friday afternoon to toss anything (1) two weeks old and older, or (2) lacking a date.
Explain to this person that you’re trying to streamline things and counting on their help. Ask them to call you out after they’ve removed the stuff they intend to toss on Fridays; this will help you get an idea of what’s NOT being used. This may prompt you to change your minimum size; to notice something that is valuable after all, based on a pending job; to specify some stuff for ripping into kicks or aprons rather than tossing in the dumpster or even to decide eventually that anything under a half sheet just isn’t worth the trouble.
The pack-rat syndrome exists in every shop, to one extent or another. While there are no easy answers, there are strategies you can put in place to cut down on clutter and dangerous conditions.
The key is taking deliberate steps, communicating your goals to employees and following up consistently until new habits replace old ones. Doing so will enhance your shop’s productivity, safety and overall profitability.
Questions for Tony?
Got a question? An experience you’d like some feedback on? Send your e-mail to [email protected]. Please put “Ask Tony” in the subject line. Even if your question is not used in the magazine, Tony will do his best to respond personally via e-mail. Because CWB reaches the desks of company owners and managers, we gladly preserve questioners’ anonymity upon request.
Have something to say? Share your thoughts with us in the comments below.