Give Yourself a Price Break -
The Law of Reciprocal Activity Costs

We have, and we know you have, seen all kind of savings claims related to buying janitorial products. In the last decade, the claim that a new product will save money is perhaps the most common appeal made by manufacturers in this industry.

Here are some examples:

Appeal
"This box of paper is much less expensive than the box you are currently buying."

Common Realities

  • The "less expensive" paper may be consumed much more quickly for one of several reasons - often including the way the dispensing system works. The result could be higher cost in the long run, more complaints or more labor for refilling.
  • Less paper per case, roll or sleeve.
  • The quality could be different from what you have been using, or performance lacks, which may result in dissatisfaction or require additional expenditures.

Appeal
"This floor pad is just as good as what you are using, but costs less."

Common Realities

  • Pad may deteriorate faster.
  • Pad interior is less abrasive than pad exterior.
  • Pad is thinner.
  • Pad construction is not as effective.

Appeal
"We can service your <insert equipment type here> less expensively. Our rates are lower."

Common Realities

  • Service staff may be far less experienced, resulting in longer, less successful service visits and more equipment issues.
  • There may be fewer available service staff members, resulting in response delays or rushing through jobs.
  • Service of equipment is often not a core competency of the company offering the lower prices, but simply an "add-on."

THE FALSE ECONOMY oF CHEAPER PER CASE

Okay, so you probably can think of additional examples for this list as quickly as we can. These all come under the general heading of "false economy." In other words getting a discount on a very limited budget line item (all supplies combined are seldom more than 5% of the average custodial department budget), often ends up actually costing your department more "in-use." Cheaper-per-case often equates to more-expensive-per-use.

CONSIDERATIONS MORE IMPORTANT TO YOUR BUDGET
THAN COST-PER-CASE

There are other areas in purchasing janitorial supplies that are key to managing the facility maintenance budget. In our experience those areas are sometimes overlooked. One is an issue on which we work with our customers, and often to good advantage. It involves the relationship between supply and product function, needs of the building stakeholders, needs of the cleaning staff and the definition of clean being sought. We call the process of fixing problems in these relationships Alignment. In plain English, it is critical to look at how cleaners clean most efficiently and with what products and equipment in order to achieve the agreed-upon needs of the building users. The right adjustment to staff effectiveness can easily be worth more than all price discounts and perceived advantages from cheaper supplies combined. Improvements in efficiency are concrete and continue to pay returns on the original investment - usually training, application of the right products (not always the cheapest), use of effective equipment and measurement and documentation of results. 

HOW YOU PURCHASE DOES MATTER

Here's an area that relates directly to how much value you get for every facility maintenance dollar you spend. How efficient is your ordering? Are there considerable costs embedded in your standard operating procedures that are avoidable?

Every time your vendor experiences an activity related to providing the products you need, not only does it ultimately affect the pricing of those products, but more importantly, it affects all of your related costs in-house at the same time. It is called The Law of Reciprocal Activity Costs

For example, the vendor takes your order, which involves trained individuals and related data entry. But before that happens, you have to assemble the order. (On-line ordering from PUR-O-ZONE can streamline this process for both parties and leaves a database of information you can use to improve later ordering.)

And so it goes with the other activities of your order. The vendor invoices you. On your side of the ledger, you must receive, check, process and pay the invoice. The vendor ships the product along with bill-of-lading paperwork. You have to receive the products and process your associated internal paperwork. Each cost to the vendor originates with a similar cost from your budget, or vice versa. These costs are important to recognize and, because they are considerable, to attempt to reduce.

In 2010, the American Quality and Productivity Center gathered costs from scores of purchasing agents across the country. They found that the average purchase order alone (just one part of the ordering process) costs businesses $162.08. The least-efficient businesses ran as high as $506.52 per order, due entirely to how they purchased. [Infographic]

MINIMUM ORDERS ARE A GOOD START FOR EVERYONE

Have you thought of requiring a minimum order level for outgoing purchase orders in your business (school, church or other organization)? Perhaps you should. If a product or service is purchased repeatedly, the number of times it is purchased in a year makes a big difference to the bottom line. Writing fewer orders cuts all the costs above, which for a $25 order, can be between 6 and 20 times the cost of the actual items on the order. Here are some savings you will make by ordering more products less frequently:

  • Lowered receiving and stocking costs
  • Less time spent checking inventory
  • Fewer checks cut
  • Lowered shipping costs (by shipping more at once)

Lowered frequency of ordering not only saves your company, but makes your orders less costly for vendors to process. It may assist you in getting better pricing, achieving volume discounts or allowing you other "best customer" services. It will likely reduce the incidences of running out.

Bottom line, how often you purchase is really every bit as important as what you purchase. 

Related article: Where is the Break-Even on a Warehouse Club Trip?

From our original discussion of this topic. 

From our original discussion of this topic.