Professional Development: Purchasing Habits And Costs
By Laura Brown
Published in the November 2005 issue of Today’s Facility Manager
How facility managers choose to purchase the products their facilities need can have a dramatic impact on the overall cost of maintenance. Some supplies are easy to manage. For example, most facility professionals know how many packages of paper towels their facilities use in any given time frame. So they plan ahead and buy paper towels in large volume. There is the benefit of a price break on a large order, because customers have an existing agreement with their paper towel suppliers.
It may be surprising to discover that this kind of pre-determined purchasing behavior only accounts for 60% of the total money spent on facility maintenance products. The remaining 40% is caught up in what the industry now refers to as “unplanned purchases.”
As the term implies, an unplanned purchase is any transaction that can’t be arranged in advance. It may apply to an item that is only needed a few times a year. This behavior could also occur when an item or piece of equipment is purchased for the first time, and the facility manager is unsure whether or not he or she will ever need to purchase the item again—or at least not for a very long time.
There are many ways to handle these unplanned situations. However, a facility manager’s strategy will determine whether an unplanned purchase saves time, money, and hassle, or ends up costing the business a bundle.
For planned purchases, a typical company will use five or more suppliers for a few high volume items (like those paper towels). For unplanned purchases, a typical company will have more than 20 suppliers from whom it buys thousands of different products and repair parts every year. That’s because every unplanned situation means pulling out catalogs or searching the Internet to find the company that carries the product that slipped through the cracks in the past.
Finally, the facility manager selects a company that can supply the product. More than likely, it will be the first time formal business will be conducted between the two parties. Now there is a new supplier, which means another set of relationships to manage and another buying and receiving process to formalize.
Another significant issue is storage. Space will naturally be dedicated to those items bought on a regular basis. But with an unplanned purchase, a significant amount of time goes into finding the product. Once it is located, the tendency may be to overbuy in order to minimize hassles in the future.
By the time the right supplier has been chosen, approvals have been granted, and orders have been placed and processed, the transaction may actually cost an additional $100. When added to the price paid, this number can mushroom, particularly if unplanned purchases happen often.
So how should a facility manager prepare? The best bet is to be selective when it comes to suppliers. Choosing those who can do more is a good rule of thumb. This will help minimize the impact of an unplanned situation.
A good supplier offers products across a wide range of categories and can even locate items from other suppliers, if necessary. In other words, if they don’t have it, they’ll find it.
Generally, suppliers with large product inventories employ their own technical experts. They can also can into tap product specialists from their suppliers. So when technical specs or more detailed information are needed, they will be able to find the answers. Making the right purchasing decision the first time gives the facility manager the advantage in an unplanned battle.
The best suppliers will also offer convenience. Look for a variety of ordering and delivery options. Facility managers are busy. What’s more, the needs of a building don’t always begin and end during regular business hours. Find a supplier that can be contacted at any time, preferably one who offers a Web site where orders can be placed 24/7 throughout the entire inventory—not just requests for monthly specials or a small representation of overstocked items. One or two suppliers of this caliber will even make planned purchasing more manageable.
Also consider a company that dedicates itself to understanding the particular needs and processes of each business and its building. This vendor may even be able to identify cost saving opportunities. Even better, look for account representatives who make house calls; this can be a huge timesaver.
If taking costs out of the purchasing process is a priority in the organization, analyzing suppliers is an important exercise. Consolidated purchasing with fewer companies may help facility managers remove a huge chunk of their process costs, which, in turn, can maximize productivity, save time, and reduce waste.
Brown is vice president of marketing for Lake Forest, IL-based W.W. Grainger, Inc.
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Topic Tags: Professional-Development