Getting the Most Out of Your Supply Dollar

November 5, 2002
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The primary goal of any service business is to be profitable. Increases in profitability can only be achieved by controlling two basic numbers: the price charged for services and the cost of delivering those services. In other words, you can charge more or cut costs to open up your margin.

Look at the cost-control portion of this equation. Service companies are very labor-oriented, therefore the best way to control or reduce costs is to reduce labor costs. This translates into being as efficient as possible, getting more done in less time. Other than enhancing the attitude and skill of the technician, the best way to improve efficiency is to have the finest equipment and supplies that you can afford.

You will never save money in the service business by using cheap and/or second-rate equipment and supplies. Paying $2 per gallon for a better pre-conditioner that will allow technicians to work even 10 percent faster is money well spent. After all, supplies like cleaning chemistry typically only account for around 5 percent of gross sales, while labor is usually 40 percent or more. You do the math.

That said, it still makes sense to shop around and buy wisely to keep supply costs under control. There are some things that you can do to afford the best quality products without breaking the bank. The key is planning.

Buy in case lots or larger sizes
There are two obvious advantages here: volume discounts and lower shipping costs. Most suppliers offer discounted per-gallon prices for 4-gallon cases, 5-gallon pails and the like. If your company is large enough to warrant it, great price breaks are available on drums of cleaning agents. The degree to which you can take advantage of volume pricing depends to a great extent on usage rate, available storage space and cash flow. At any rate, it is seldom cost effective to buy 1 gallon at a time.

Buy products that are on sale
Make sure you have a clear picture of those four or five products that you use regularly, and will have to buy pretty soon anyway, and stock up on them when they go on sale. Watch your supplier’s mailers, magazine advertisements and special sales that often accompany sponsored classes. Here again, planning allows you to take advantage of the opportunities that arise. Have a “supply fund” set aside and put about 5 percent of gross sales in it every week so that when the sale comes along you will be able to take advantage of it. A friend once told me, “Luck is when preparedness meets opportunity.”

Buy concentrates
Don’t fall for the lower price per gallon of a low-dilution or ready-to-use product compared to the higher price per gallon of a concentrate. Read the labels and do the math to be sure that you are comparing apples with apples. Always work out use costs at a ready-to-use concentration. This is especially true with pre-conditioning agents, emulsifiers and protectors. Another advantage in buying concentrated products is that you will save shipping costs; it is less expensive to ship one case of 1:10 pre-conditioning chemical than two cases of 1:5 pre-conditioner.

Establish re-order levels and follow them
The least efficient supply purchase of all is when you run out of product and have to drive out of your way to pick up a gallon or two to finish the day. By establishing a minimum on-hand level, based on rate of consumption compared to normal delivery time, you should never run out. For example, if it typically takes three days to get an order in from your distributor and you use a gallon each day, you should order when you open the last 4-gallon case in the supply closet.

Track your usage
Keep a running log of how much work was accomplished per unit of supplies. This can be either the amount of carpet cleaned or the amount of revenue produced. Take time to look this log over every week or two. Any sudden changes could indicate equipment malfunction, sloppy measurements, wasted product or even employee moonlighting.

Use compatible products
Whenever possible try to use products from the same manufacturer’s line, especially products that are used together such as pre-spray and rinsing agent. This is good business both from a compatibility standpoint and in that it will make you a more important customer to that supplier. That comes in handy when you need special assistance.

Keep an open mind and try new samples
When your supplier offers you the latest and greatest innovations and gives you the big sales pitch, approach the opportunity with some skepticism but ask for a reasonable size sample to allow you to evaluate the product. Then make sure you use the sample in a good test that will give you the chance to evaluate the product fairly. Be open minded enough to switch if the new product is truly revolutionary, but don’t just believe the ads or the salesmen. Any supplier not willing to let you sample a new product before adding it to your regular orders should be questioned.

The same basic philosophy applies to parts and tools as well. Keep an extra wand valve kit, groomer, upholstery brush, wand jet, pump sprayer kit and the like in stock to minimize down time. Don’t forget to reorder as soon as the spare is put into service. It takes a little planning and common sense, but smart shopping with your supplier will help you open up those profit margins and reduce your daily stress level.

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