The price you pay for supplies is the tip of the iceberg.
By David Miller
Front office people are under constant pressure to cut expenses. I know this because I’ve often found myself in the presence of an otherwise happy customer, being challenged to lower my prices some way, somehow, or face the threat of losing the business to a competitor. It is a familiar dance that none of us in account management ever quite gets used to.
But the savvy customer understands that saving money on supplies is a lot more complicated than just finding the vendor with the lowest prices. The ideal vendor will not only have competitive prices, but they will also be responsive, reliable, offer quality goods and will mesh well with your organization. Finding a vendor that works well with the way you do business can actually save you money in ways that have nothing to do with the price of the goods.
Vendors differentiate themselves from competitors in a variety of ways that add value to their brand. They may have a convenient location, a feature-rich Web site, a huge selection of products or excellent customer support. One powerful area where a vendor can add value in the ways they assist customers is in managing their inventory.
Passing the Supplies Baton
If you think of your supplies as a baton in a relay race, the handoff between the vendor and user can take place over a wide distance. It can happen early, where the user has to run further with the supplies to reach the finish line, or it can happen quite a bit later, where the vendor does most of the running. In the early handoff scenario, the user assumes all the responsibility of managing the supplies and the vendor is simply handing off a carton of goods and walking away.
The vendor that takes the baton nearly to the finish line is one who is not only selling supplies, but managing them on the user’s behalf. This relieves the user of most of a lot of time-consuming activities, such as monitoring consumption and reordering before stocks run low and restocking bins. Otherwise known as vendor-managed inventory, this is a full-service approach that will cost more but can pay for itself if the client is already stretched thin and is having trouble keeping on top of supplies. There is nothing more expensive than supplies that you thought you had but cannot seem to find. Any system that fosters smooth operations is going to be less expensive than a system (or lack of system) that disrupts activities and pulls people off their money making duties in a chaotic scramble until the problem is resolved.
In other words, the cost of supplies is not just what you pay for them; it is the cost expended in keeping the items available for service up until the moment they are consumed. Also, the lowest cost supplies in your stock room tend to have a disproportionately high cost to manage.
Putting Away the Clipboard
For years, managing inventory was a time-consuming affair that required frequent visits to the supply room with a clipboard and pencil, painstakingly counting stock and hopefully catching shortages before they became an emergency. Whether it was managed by the client or the vendor, somebody had to do it.
Nowadays, there are a lot of labor-saving techniques to automate inventory management, and the more forward-thinking suppliers have recognized that offering ways for customers to automate the management of supplies benefits both parties. Any method that replaces the old clipboard with real-time monitoring of supplies is going to be a giant leap forward in time saved, and many of the solutions have added savings in consumption and fewer stockouts as well.
These systems employ a variety of methods to check in and check out supplies. The simplest method is a bar code scanner that records the unique bar code of each item in your storeroom and relies on the discipline of your team to use the scanner every time inventory moves. Other methods are RFID chips or even using electronic scales under every bin to determine inventory levels by referencing the weight in the bin to the pre-programmed weight of the item occupying that bin.
Vending Machines
Vending machines have seen explosive growth as an inventory management tool. In addition to being able to keep accurate counts of inventory on hand, the restrictive access to supplies results in lower consumption of those supplies. Managers can keep track of who is consuming what items by looking at the history of each team member’s interactions with the machine.
Inspired by the success of vending machines, other systems have emerged that aim to capture the most attractive attributes of a vending machine while leaving out some of the costs and limitations.
Variations on the Theme
A typical version of this hybrid system is a secure closet or crib that can only be accessed by an authorized user using biometric authentication—a fingerprint or even a face scan. Once access is gained, the user’s movements are recorded with security cameras until the user finally exits the closet. All this information—video and barcode scans made during the session—is uploaded to a secure cloud account that can be viewed by management. Any questions about unexpected conditions in the closet can be answered with a review of this data. Management can also access critical information about usage, trends, alarms and low stock warnings.
Asking the Right Questions
As you might expect, there are strengths and weaknesses to each of these methods. The trick is to select a method that is a good fit with the way you do business. Some questions to ask before making a commitment are:
How does this system integrate with our purchasing system?
If we want to buy certain supplies from another source, can we incorporate those supplies into this system?
Will we have any control over stocking levels or will they be determined by the vendor?
When do we get billed for the supplies? When they are placed in our facility, or when they are dispensed to the user?
In the event of power failure, will the system continue to work?
How easy is it to add new users? What kind of customer support can we expect?
The cost of implementing the new system is often borne by the vendor. In exchange, there will be a long-term contract requiring a minimum purchase of supplies. It can be very costly to break these agreements, so it is important to have an accurate picture of what the system will do for your company before you sign on the dotted line.
Informed Cost Cutting
Next time you scour your balance sheet in search of ways to cut costs, look beyond the price of the supplies you are buying and focus on the total cost of supplies. Saving a few cents on gloves may mean moving from a supplier that meshes nicely with your company to a supplier that winds up costing you much more by falling short in the execution. If you really want to save on supplies, think about how they are being managed and what you might be able to save by upgrading your system. Ask your vendor what he has to offer on that score and see what else is out there.
David Miller is the Waste Industry Manager for HUB Industrial Supply (Lake City, FL). He is a Certified Safety Professional and works with managers to effectively implement and manage PPE and MRO programs in the waste industry. He may be reached at [email protected]. HUB Industrial Supply is an Applied MSSSM company.