If you want to spend less money on fuel system components…
Parts & components are one of the biggest expenses for any operations manager. Fuel systems injectors. Lift pumps. Turbocharger assemblies. The list goes on.
Unfortunately, buying those components usually costs way too much.
Here’s the issue:
Most companies see vendors as vending machines: place your order. Receive the product. Pay the invoice. Repeat.
Relationships aren’t built. Buying strategies aren’t developed. And price negotiation pretty much doesn’t exist.
That has to change if you want to reduce spending.
Strengthening vendor relationships is one of the best levers operations managers have to reduce spend. All it takes is consistent effort. You don’t need a huge procurement budget or a team of buyers.
Here’s what’s covered:
- Why Vendor Relationships Are Important
- Ways Vendor Relationships Save You Money
- 4 Steps To Improve Vendor Relationships
- How To Buy Fuel System Components The Smart Way
Let’s jump in.
Vendor Relationships Are Important
Vendor relationships should be built like any other professional relationship.
When a buyer interacts and communicates regularly with a vendor, both parties benefit. The vendor receives repeat business. And the buyer receives exclusive perks like discounted pricing. When product is limited, those vendors also tend to fill orders for loyal customers first.
Obviously, that makes sense. A vendor who has a relationship with a business is going to be more willing to offer them a better deal over someone who may be a one-time buyer.
Plus this is critical when dealing with components such as fuel system injectors and fuel pumps. Having vendors who specialise in these parts, like Goldfarb Brothers Inc. where operations managers go to purchase Perkins injection pumps, can help save money and ensure you don’t get any counterfeit parts that could lead to expensive repairs and downtime.
Read that again:
According to The Hackett Group’s research, companies with the strongest vendor relationships spend 21% less than their competition and have a 2.5X higher return on investment.
Vendor Relationships Can Reduce Costs
Improving vendor relationships is more than just a feel-good strategy. They actually have a direct impact on your bottom line.
Improved Pricing & Terms
This one should be obvious. The more a vendor sells to you, the more room you have to negotiate on price.
Think about it.
You have no negotiation power as a one-time buyer. But if a vendor wants your repeat business? Now you have the advantage.
Less Supply Chain Interruptions
Nobody has time for supply chain delays. When parts don’t arrive on time, it takes your operations offline. Vehicles aren’t moving. Money isn’t being made.
But when you have a good relationship with your vendors, they’ll go out of their way to ensure you get the parts you need. Forget about placing your order first. Loyal customers are prioritized when items are low in stock. They’ll also be more communicative about any potential delays.
Better Quality Parts Means Fewer Returns
When you buy from the same vendor over and over, everyone knows what to expect. The vendor knows what quality you want. And you know what the vendor will provide.
Returns will never be 0%, but you’ll see a drastic reduction by simply working with the same few vendors.
How does that save you money?
Well, think about every returned part you’ve had to send back. Then think about how much time it took to find a new vendor to resupply those parts. Returning parts costs money. So does finding a new vendor to correct the issue.
4 Ways To Improve Vendor Relationships
The most successful vendor relationships are built on consistency.
Below are four simple steps you can take today to improve vendor relationships:
Communicate With Your Vendor
First and foremost you have to talk to them.
Don’t wait for a problem to arise to bring something to your vendor’s attention. Be consistent in your communication.
Provide them updates on your inventory levels. Tell them about your upcoming needs. And don’t be afraid to offer feedback on their products.
When vendors know what your expectations are, they can exceed them. And vendors love buying from clients who communicate clearly. It allows them to better plan for inventory and production. Which can lead to discounts and better service in the long run.
Purchase From Fewer Suppliers
The more vendors you purchase from, the more your orders get diluted.
If you spread your business across 10 vendors, your buying power from each vendor goes down. You won’t be able to build a strong relationship with any of them. There will be more invoices to manage. And more vendors to contact should an issue ever arise.
This isn’t to say you can only purchase from 1 vendor. In fact, doing so is pretty risky. But you should strive to limit your vendors as much as possible.
Deloitte’s Global CPO Survey found that 67% of high performing organisations focus on reducing the total number of suppliers as a way to improve collaboration.
Pay On Time
Buyers seem to forget about this step.
Paying on time matters. Don’t be that buyer who blows your vendors off. The ones who send reminders after reminders.
Build a good relationship by paying on time. Even paying early if you can. Some vendors will give discounts for early payment.
It’s as simple as that.
Negotiate Contracts
Buying power goes down when there are more vendors in the mix.
Negotiating contracts is another way to gain that leverage back.
Long term contracts not only guarantee your pricing, they guarantee your supply as well. Imagine this scenario: you need fuel system injectors and so does your competition.
Who do you think your vendor will sell to first?
Exact same thing if parts are low in stock.
Buying Fuel System Components The Smart Way
Before wrapping up, let’s talk about how to save money when buying fuel system components.
Saving money on fuel systems doesn’t always mean buying the part with the lowest price.
Too often operations managers purchase the cheapest part from wherever. What’s funny is that part ends up costing more money in the long run.
Here’s what you should be considering:
- Buy quality parts first. If you purchase cheap components from unknown vendors, you’ll be replacing them twice as often. Not to mention you risk buying counterfeit parts that could break down on you.
- Do business with vendors who specialise in the parts you need. These vendors have years (if not decades) of experience installing and repairing the same components your business needs. They have a better understanding of the parts.
- Check out their reputation. How long have they been in business? How reliable are their shipments? What is their return policy? Do some research on your vendors before buying.
In business, buying the cheapest part isn’t always the best option.
Companies who understand this save millions over companies who don’t.
Wrapping Things Up
Improving vendor relationships can help your business spend less money. Simple vendor relationships lead to lower pricing, minimized supply chain interruptions, and better quality parts. All of which lead to increased profits.
Here’s a recap of what was covered:
- Treat vendors as you would any other relationship
- Talk to them consistently and provide updates
- Purchase from as few vendors as possible
- Pay on time to build a stronger relationship
- Negotiate contracts when making bulk purchases
- Only buy from vendors who specialise in the parts you need
Operations managers who value their vendor relationships will always outperform those who don’t.
You don’t have to improve relationships with all of your vendors. Just start with one or two of the strategies above and you’ll see a difference.
Vendor relationships can be the competitive advantage you’ve been looking for.
