Purchasing in a just-in-time environment is never an easy task, and when the transactions concern rapidly changing technologies, it's that much harder. Now, as fuel prices continue to skyrocket, the days of, "I needed it five minutes ago," have all but come to a close. As a result, purchasing managers are under increasing pressure to make every dollar count.
"The problem for these integrators is: how do I manage my cash flow and make sure that these materials are not sitting on my dock? And, at the same time, how do I get them here in the most efficient way possible?" illustrated Mike Vivian, vice president of sales and marketing at AV distributor Herman Electronics. "It's almost contradictory. If you want everything to come in via ground, you've got to give it some time."
One of the ways to streamline the purchasing process is to source as many products as possible from a single vendor, noted Steve Young, vice president of sales and marketing at Atlas Sound. "I would hope that the typical integrator would consider what the vendor, like us, has to offer, and how they can minimize their admin overhead by consolidating as many purchases to as few vendors as possible," he said. Products such as loudspeakers, racks, and amplifiers can be bundled together, and many manufacturers, such as Atlas, offer aggressive freight programs that feature discounts when items like these are packaged together in one order.
Tom Berry, president of Verrex Corporation in Mountainside, NJ, recounted that one way his company has handled increased shipping costs is by purchasing equipment for several projects at one time. "We will cut one purchase order for four or five different products for four or five different projects," he said. "That makes us more efficient on the paperwork end as well."
Berry explains that his organization is also adept at taking advantage of free shipping offered by manufacturers. "When you hit a certain price level with the manufacturers, they throw in free shipping," he said. In order to benefit from this, however, he noted that everyone in the company must be aware of just how important these offers are. "You've got to educate the entire company to take a frugal line, because otherwise everything costs more money."
For products that are used internally--such as office supplies and equipment--Berry touts retailers such as Staples and OfficeMax, which feature online services that allow purchasing agents to track the company's buying history. For products that are destined for the job site, Berry would like to see a standardized pricing format, such as E-ZIP, which is sponsored by InfoComm. Structured based on an Excel spreadsheet, E-ZIP features pricing information supplied by manufacturers, and enables dealers to write a common import filter for whatever data system they have in place.
"What we're asking for is not easy to do; it requires change," Berry acknowledged. "However, a systems contractor needs to not spend hours and hours tearing pages out of a price book or making sure that the online database that each of us has customized is up to date. With the technology moving as fast as it does, standard pricing would be a great help."
One challenge that purchasing agents run up against is how materials are handled once they show up at a systems integrator's warehouse: the procurement department may have ordered items destined for Project B, but they wind up being "borrowed" by someone from Project A. "Procurement says, 'I already ordered that,' and then they have to re-order that product overnight when they shouldn't have had to," Vivian illustrated.
Young noted that with the entire industry--manufacturers as well as systems contractors--operating based on a just-in-time model, communication between contractors and their vendors is crucial. "If there are projects out there that involve spike demands of various goods, contractors need to communicate that with our rep network, and then they can communicate that back to me," he said. "We make our forecasting plans for subsequent years based upon history, but almost 30 percent of those plans involve an SKU-by-SKU analysis and interaction of our sales managers to see what people are using."
Forecasting is becoming increasingly important as the price of materials, such as steel, is on the rise. "Oil is in the news a lot right now, but steel is close behind it in the way that we've seen price inflation," Young said. More disturbing, he added, is that there are shortages of certain types of steel due to the increased world demand for it. "We build a lot of products in our facility in Dallas, and there are some times when we are in an outage situation simply because of raw material availability--you can't buy it at any price. It's not dramatically affected our business, but it has made things a challenge."
