Delivered Supplies Cost Analysis – Is Cheaper Really Cheaper?

It happened again this week. A customer handed me 5 invoices showing me the billed amount from the vendor he replaced us with because he had a cheaper price for materials. So we sat down tocheaper compare the proverbial apples to apples numbers. The first invoice was $.22 per foot less expensive than our pricing, but adding in the freight for the material the delivered price was more than $.26 per foot more than my delivered pricing using a local cartage company to deliver from our office to his office. His material was shipped  half way across the country and of course the supplier added shipping cost. Additional items on the invoice was resin. The supplier and the customer never talked pricing on the resin as the material was less so the customer assumed the resin must also be cheaper as well. Resin tends to be heavy and shipping costs for the resin he was getting was almost as much per pound as the resin itself. So we analyzed the invoices to include all costs. In analyzing 5 invoices over 6 months, the customer paid over $4,000 more for the same materials he could have purchased from us.

If this has happened to you, don’t despair. It’s happened to me as well and I’m sure just about everyone else who’s purchased anything. I’ve always been wary of “shipping & handling fees” that many vendors want to add to their extremely low priced merchandise. I especially like the “buy one and get the second one free”¬†– just pay the additional shipping and handling fees.

We often get requests for pre-impregnated tube for larger diameters from customers who’ve gotten an unusual job. This last week a customer needed 120′ x 12″ liner for a job and got a quote of $20.53 per linear prepregfoot delivered to his job site. He wanted us to quote the same material. Something didn’t sound right as his job site was 750 miles from the wet out facility. Further, they said they would load it into a refrigerated truck, place ice between layers of liner, hook up a truck, and send the driver on a 1500 mile round trip included in the price. The liner was for 3 individual shots, so the contractor said he’d planned to get the 3 segments in the ground in 5 days. So the truck would sit at the site for a week, a driver on the clock waiting, and no additional charges? As this was his first attempt at this type of job, I asked him to get his quote for all of the above including the shipping, driver, truck, diesel fuel, ice, refrigeration as well as the tube and resin delivered included in the $20.53 per linear foot. In further checking, he found out that was not the case. The supplier ended his role as the calibrated wetted out tube exited the pinch roller. After that the contractor was responsible for everything else. The “broker” he was buying this through had no experience with this kind of material either, so to get the sale he’d told the customer anything to get him to buy. The sad part of this story is the customers quote to the sewer agency that was based on the $20.53 delivered price. He wanted to get future work from this agency and went in at $60.00 per foot installed, just to get a foot in the door. Unfortunately, he was destined to lose money on this job, because he wasn’t familiar with what his costs were.

What we’ve learned today is to calculate all of your costs when buying something. A few moments of analysis may save you money or keep you from losing money. If you aren’t sure about a new endeavor, talk to the guys who’ve been where you are. Learn from their experience and let them help you succeed.

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