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Question submitted on 19th Nov 2001
I don't expect an answer, but I seem to be paying over the current going rate for profile. What is the going rate and what would you recommend I do?
David Amos answered on 30th Oct 2001

There is no going rate for profile. Systems companies, like everyone in the supply chain, incur costs for their raw materials and then in converting into profile to sell onto fabricators. Like you, systems companies need to make a profit in order to reinvest into new products and new plant and facilities. There are a few general rules in purchasing any commodity.:

  • Firstly there are economies of scale. This means the more you purchase the more efficient your supplier is and therefore, the cost will be lower. Both parties can expect to share such cost benefits.
  • Secondly, the hoary subject of cash flows. The less risk a supplier enters into and the faster he receives his cash then you could well expect to pay less. It is not unusual for manufacturers to agree to pay for their products weekly.
  • Thirdly, if your supplier is regularly bringing out new products from which you benefit by gaining a competitive edge over your competitors then you should expect to pay a little more for your products.
  • Finally, always get three quotes whether you are purchasing direct materials or complex machinery.

In conclusion, do talk to your supplier, prepare well and remember the best outcomes are win-win. In other words you both benefit from the negotiation.


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