Keeping business machinery running is more important than unit price savings. Choosing the right supplier for electrical consumables is therefore critical.
Electrical consumables are critical for any business with maintenance, repair and operations (MRO) needs. The importance of this category differs from an office to a manufacturing facility. The difference is the impact value of productivity for critical machinery when not working.
For those businesses with a significant need, consumables can be a huge expense line. Management of this expense line becomes critical whether you buy direct or through a maintenance supplier.
We have seen this category open to gaming by suppliers to win business and claw back margin later. Those businesses that use an RFP approach are particularly vulnerable to such tactics.
Beware also the ‘enemy within’. Without focus and controls over electrical sub-contractors consumables may not be consumed on the job for which they were ordered.
With millions of product and supplier combinations available on the market it pays to work with a partner.
Transparency creates accountability
Supply Clusters provides transparent reporting on Electrical Consumables through our member portal. Simply sign up to our Standing Offer arrangement with L&H and your data will be available 24/7. Members have access to all of their data including detail on every single transaction. Join today, start saving on Electrical Consumables and see all the detail you need to manage your needs:
- Quantity and Spend by period
- Purchases by cost centre
- Transactional level detail on each product ordered
Things to look out for when choosing an Electrical Consumables supplier
Sign on bonuses
Sign on bonuses are an up front payment from the supplier for awarding the contract. It is a sales tactic to hand you ‘free money’ while putting unfavourable terms in a contract. The supplier will add this into their margin so you are not getting anything for free.
Limited contracted basket
Offering a saving on the high use items you buy means you are paying full whack for the rest. This flawed method aims to provide visibility on the items you buy most. What it usually does however, is remove visibility to the majority of items you buy (the ‘tail’). It is on these items that you end up paying more than you should.
Pack size confusion
It is common for different products to come in different units of measure. Then there are different pack sizes in individual packages (e.g. pack of 12 vs box of 12 packs). There are also bulk packs for many products to consider. Some suppliers may take advantage of the confusion created by this level of detail.
A cheaper alternative
This involves replacing premium or branded product with a cheaper product. Cheaper brands may offer valid ways to save over branded products. They may even do a similar job but may not always deliver the same result which can be more costly or dangerous in the long run.
With so many products required in this space it is a challenge for many suppliers to maintain adequate stock levels. When stock runs out, an alternative product to meet immediate demand may be supplied. Sometimes the alternative product also delivers the supplier a higher profit. This type of predatory behaviour is more common than many would expect.
Better buying outcome
Consider a more structured approach which delivers cost savings across time. The lowest basket price on a small range of top spend items at the time of consideration is a traditional but diminishing return approach that may reduce overall value:
- A broad contract basket rather than focusing on top ordered items.
- Forget sign-on bonuses that lock you into volume commitments or limit you from moving when terms become unfavourable.
- Implement a substitution policy that ensures the quality, specifications and price of any substituted products.
- A robust supply chain to ensure that the contract basket of products is always available.
- Broad branch network to ensure stock is available when and where it is required.
Supply Clusters Offer
Supply Clusters partner with L&H for all of your electrical consumable needs
Members receive the following benefits from L&H:
- Free spend analysis. Save time – have our team of analysts do it for you.
- Network of 150 branches Australia-wide.
- Reduce the number of vendors and standardise products to maximise savings.
- Locked in contract pricing on a basket of over 900 core electrical consumable items.
- Unit cost savings.
- All standard product prices fixed with an annual review conducted by Supply Clusters.
- Ordering and buying behaviour compliance tools.
- On-line portal to access your spend data which enables drill-down to cost centre and transactional level – this is key to maintaining visibility and control.
- Access to volume rebates (Premium Members) across all spend with L&H.