Squeeze until the pips squeak

Theres a recession, its a buyers market. So surely now is a very good time to squeeze distributors for even more price cuts? Not necessarily, says Paul Bowler of Takbro. No matter what business you are in, your customers are constantly pressuring you to reduce prices. Its seems only logical, therefore, for you to do the same to the distributors you buy from. And, up to a point, I would agree.

Unfortunately, most of the products distributors sell are bought in from overseas suppliers. Payments are typically made either in Euros or US Dollars. So even if the distributors can persuade their suppliers to cut prices, these reductions will be swamped by the much larger increases due to currency fluctuations.

The result of this is that the prices you pay to distributors are likely to increase rather than decrease. The effect of the fall in value of the Pound is simply too large for distributors to absorb if they want to stay in business.

Whats to be done? The first thing to realise is that youre not alone with this problem all of your competitors are in the same position so, at least the playing field is level.

But that doesnt mean that there is nothing that can be done. It may well be profitable to review the distributors you use. Could you benefit by choosing distributors that offer a wider range of products, so that you need to use fewer of them? That might allow you to make savings by reducing your administrative workload.

Some distributors will provide components packed in special quantities or even kits to suit your specific requirements, offering you substantial time savings.

An expert distributor may also be able to suggest lower cost alternatives to the products youre currently using. Technology may have moved on since you last reviewed the specification, or the current product may have a higher specification than is actually needed. In fact, there are very many ways that a good distributor can help you to minimise the effect of rising component prices. All you need to do is ask!

Squeezing distributors for lower prices until the pips squeak is unlikely to be a productive exercise. Instead, wise companies will be exercising greater care in the choice of distributors they work with, and making sure that they make the best possible use of the services those distributors can offer.