Handing Over the Heavy Lifting
How vendor consolidation can save you time and money.
Witten by Sarah Kennedy
An experienced shop operator surely understands the importance of regularly examining the pricing structure of their overhead supplies; be it bulk oil, chemicals, automotive parts or even your internet provider, the list of vendors helping you keep your phones ringing and bays humming can be quite long. Letting old contracts remain unexamined can turn a once-great deal into a costly expense. A noticeable spike in your freon costs, for instance, may inspire you to start calling around. Pricing, however, shouldn’t be the only factor in maintaining a long-term relationship with a wholesaler. After all, with proper matrixing on your end, market fluctuations in parts overhead—which can be completely natural and justified—shouldn’t mean you lose money. Just as grocery store items change in price with the market, so should your services.
When it comes to vendor selection, you need to engage in a disciplined process that reinforces your business model: to properly and profitably maintain cars. Let’s explore how thinking critically about vendor relationships can help.
Google Your Vendor
No matter the scale of your operation—a single store or large franchise outfit—you must consider things outside attractive pricing structures. Research whether a supplier will be around for the long haul (perhaps extremely low pricing is a sign of a vendor off-loading their inventory and prepping for a sale or merger unfavorable to your business long-term), whether the public has certain opinions of a wholesaler that would make selling challenging (are they known as the “substandard” version? Were they recently in the news in bad way?) and how well they’ll have your back if something serious happens (a sudden change in your needs or an issue with a consumer).
William Lyons is the Director of Procurement at Valvoline; as a supply chain leader with large-scale sourcing and purchasing responsibilities, he’s experienced when it comes to vendor relations. When choosing a supplier, William considers much more than price. “We consider other factors, such as supply assurance, product or service quality, innovation and the ease of doing business. We assess the suppliers network, risks to their ability to supply, and their financial strength. If they are working on our property, there are other levels of environmental and safety risks that must be evaluated. It is important to understand their internal quality metrics and controls. We prefer to partner with innovative companies, are they an innovator in their space? Finally, there is the ease of doing business where timely communication, accurate billing and other factors weigh into our sourcing decisions.”
While price is often the first place people look when evaluating a proposal or contract, it’s not the only factor in determining what the total cost of the relationship will be long-term.
Never Cut a Tree Down in the Wintertime
Creating a genuine, mutually beneficial relationship with a vendor takes time. You’ll need to experience a vendor’s day-to-day contract fulfillment in order to conservatively increase your order volume or product line selection and give them additional chances to shine. No supplier is perfect, but a high quality vendor partner should be better than “good enough.” Are they on time, time after time? Is the product quality what you were promised? Sometimes, these questions take a while to answer. Tie rods and ball joints, for instance, can go for months before developing noticeable play during a warranty period. Remanufactured power steering pumps, alternators and starters may also need a longer trial period before switching entirely over to a certain brand.
If there’s a service issue, do they promptly and easily take care of you? “A clear number one for me is ‘bad news doesn't age well,’" says Sullivan. “Stuff happens in the supply chains of vendor-customer relationships which are often outside of either party's control (for instance, hurricanes). For me, it is important that the vendor works quickly and responsibly—in the spirit of a partnership—to solve a disruption or service issue.”
There may not be any supply or service issues for a few billing cycles—in the meantime, use quiet days to catch up with your reps and make personal connections with the team servicing your account, including the routeman and accounting clerk.
On the flip side, a vendor will need to be witness to your accountability too—consistency in order volume and accounts receivable might need to be established before they offer you their VIP treatment. Don’t be the account they “eye-roll” when they hear your voice for the dozenth time that week. However, if you aren’t getting what you need from a vendor after a few interactions, don’t be shy about moving some or all your volume elsewhere; plenty of other companies would love a chance at your business.
Yes, You Should Definitely Ask for Lower Prices
Especially if you’re increasing the volume and breadth of products or services you’re purchasing from a vendor. “In most—but not all—cases, scale matters. In other words, the bigger our spend, the better price is merited,” Tim Sullivan says. “When we can represent one of a vendor's top customers nationally or regionally, there is a lot of motivation for them to give us best in class pricing.”
Be sure to research several vendor catalogs to familiarize yourself with the market before agreeing to a certain pricing structure. It would be a shame to order an extra line of products from a different supplier, only to find out your current vendor would have given you a way better deal for being a bigger customer.
Once you’ve chosen a vendor based on a variety of pros, there’s no shame in leveraging your aggregate purchases for a price break. Not only is it administratively effective to buy all your lubricants from one or two companies, for instance, but you can pitch your large purchases against price. Just don’t let price be the only factor in your vendor selection or contract renewal process.
See What Else Your Vendor Can Do
It’s important to look for more than just a friendly check-in when your sales rep calls on you. “A good sales rep always keeps us informed on industry trends and any issues that may immediately threaten our supply chain,” explains Sullivan. “Reps should never just be about price updates. When prices are steady, I still want to learn something from their visit or call. In many categories, our expectation is that our vendors will proactively bring Valvoline insights and efficiency opportunities from time to time.”
Perhaps a vendor who isn’t the cheapest supplier is still the best pick because the sales rep proudly offered fully-funded marketing programs that drive traffic to your store on their dime, creating a more profitable average ticket. In these terms, it may be difficult to calculate true cost/benefit at first glance. Keith Peshke is Senior Director of Marketing and Customer Experience at Valvoline. It’s his job to inform the company on the installer perspective. In comparing price-per-gallon of bulk oil to the value of a marketing program, Peshke explains, “If your average ticket is $325, and I help you bring back 100 more customers than you would have otherwise, that’s $32,500.”
Think about it: if you saved a quarter per gallon by going with a bare-bones supplier, it would take 130,000 gallons for those savings to exceed the value of an effective marketing program.
John Pokol is the Operations Manager of The Duke of Oil, a large and growing outfit of eighteen quick lubes and seven repair facilities in Northern Illinois and Northwest Indiana. Over the years, Valvoline has worked tirelessly to provide John and his crews with outstanding customer service, including their Reward Card program. “We’ve been using the Reward Card as long as they’ve had it. The Reward Card is just a great retention piece because that card is made out to us—we have a very good success rate with getting customers back to our store.” Not only does the program drive customers back to The Duke of Oil, but it’s fully funded by Valvoline, meaning John’s teams simply cash the discount dollars online. “The redemption part—it’s a piece of cake. We just go online, type a number in and we get a check.”
A vendor may offer even more resources to their clients, like one-stop-shop style product lines that overlap to create highly profitable tickets, job and product training, access to informational databases or help handling your customer base administratively through software or call centers. By using their resource, the time and money saved versus entering the open market and fishing aimlessly for qualified techs could ultimately drop thousands of dollars to your bottom line.
“We pretty much use everything that they have to offer when it comes to helping our business,” Pokol says of The Duke of Oil’s relationship with Valvoline. “Their products are great—but the customer service is why they are in our company.”
Your Vendor is Your Business Partner
That sentiment, of deriving maximum value from every vendor, should really resonate. As new vehicle technology enables consumers to visit their local repair facility less often, the need for repeatable and highly profitable tickets increases. Rather than too much focus on lowest price, why not challenge your vendors to provide the best overall value? They should want to help your store or franchise improve and grow—after all, the better you do, the more you order! If you start thinking of vendors less as product peddlers and more as business partners, it will make evaluating and leveraging the true value propositions of your suppliers much easier.
Want to learn more about vendor consolidation? Request a callback at partner.valvoline.com.