Shop Insight:Single, first call source or countless suppliers?

As a regular columnist to aftermarket business, and a long time contributor to our sister publication Motor Age, Mitch has his pulse on service dealer issues. Write him a note with any comments or questions you might have. (For Mitch's Motor Age columns, click here.) Human nature is anything but predictable. Libraries are filled with volumes on the complexities of decision-making and psychologists have retired on the revenue generated by the emotional fallout accompanying their results. It would be safe to say this process is heavily influenced by the relationships we share with others. And since every business is a “people-business,” every business decision will somehow be relationship-based.

For us, this has become even more a reality as we approach those who will be our first and second-call suppliers in the future.

There are countless buying philosophies we could discuss, but there really are only two to discuss from a practical standpoint.  The first suggests success is predicated on one powerful and productive first-call relationship, while the second suggests success is the result of cultivating numerous supplier relationships based upon any one of a number of criteria, not the least of which would be line, price and the specialized segment of the market served.

Some of us feel that our loyalties and our future should be tied to those who serve us best, and for many of us that means directing the overwhelming bulk of our purchases to a single, first-call source. There are others, however, who feel just as strongly that success in the cutthroat and competitive environment, which most of us face today, is the result of carefully picking and choosing what you will buy and from whom. A philosophy focused on a strong first-call relationship suggests that while the margins on some parts will at times be unavoidably lower, margins overall will be higher based upon deeper high-volume discounts. It also suggests that service delivery will be better because of the leverage that higher purchasing volume tends to bring with it.

Spreading purchases over countless suppliers brings with it the lure of the lowest possible price for every part you purchase and, consequently, the promise of higher margins. However, it also demands constant vigilance in order to insure that the price on any given part or accessory is really the lowest possible price.

There is no place these philosophical differences could have been more dramatically demonstrated than within our own family business. I am an ardent believer in strong first-call relationships. My brother is just as committed to multiple suppliers and a continual struggle to find the lowest price on the highest quality parts. Since sourcing and managing the flow of parts has been his responsibility in the past, his philosophy was allowed to prevail. He is, however, leaving and that’s where this issue of relationships and decisions is likely to bubble to the surface again.

While I will probably begin to consolidate our purchases almost immediately, the path we ultimately follow will be dictated by what our current cadre of vendors is either willing or able to do. They will decide the nature of our relationship in the future by their actions and their attitude. They will decide how they can and will serve us best. Whatever they do, however, it is safe to say these relationships will evolve based upon a complicated series of decisions set in motion by the inevitability of change. n

Note: For the rest of the stories from our September 2003 issue, click here.