Managing Costs on IT products and equipment is extemely difficult for organisations
Independent survey reports, analysis of purchases and consistent client results support the fact that 81% of organisations will pay more than they should on everyday tech products.
Resellers, suppliers or however you identify them have and continue to use a number of factors to leave you out of pocket.
So, what are they?
Managing Costs – Factor 1 – Resistance
Every tech item you purchase consists of a wholesale cost and the supplier margin.
Over many years suppliers have resisted the call for cost transparency, to show the wholesale cost of a product and disclose their margin.
A cross sector report after the pandemic found that the highest individual margin was 1456%, which demonstrates the scale of the problem.
If you would like to read the full report you can download a copy HERE
Managing Costs – Factor 2 – Manipulating price movement
Wholesale prices move on a daily basis, as the example below demonstrates.
Analysis shows that price drops are not passed on to the customer and yet all increases are but at a much higher value than the increase in the wholesale market.
Both actions protect and inflate the supplier margins while the value of the customers’ budget reduces rapidly.
The screenshot below clearly shows have prices move on a daily basis and that is gives suppliers the opportunity to increase their margin.
We have constant access to this level of information.
Managing Costs – Factor 3 – Limiting Price Validity
With very few exceptions, quotations are only usually valid for a few days.
As it can take this amount of time to obtain replies from all your suppliers when you are ready to make a decision to place an order the quote is invalid and the result is usually an increase on the initial price that was quoted.
Try to give suppliers a specific day when they need to submit their responses. This will give you time to review them while they are all still valid and if they do not respond in time let them know they have lost the opportunity.
It is important not to set a precedent and let some suppliers quote late, as you be certain that they will do it every time.
If suppliers know they will be excluded if they are late they will adapt or lose out on your business.
Managing Costs – Factor 4 – Low Value Items
There will be many items that present a purchase price of £20 or below. For very good practical reasons they do not attract much attention and usually do not require any authorisation.
The problem is that it is on these items where we see the highest supplier margins. The value 1456% quoted above was on a HDMI cable.
Suppliers know that low value items are not scrutinised and use this to their advantage.
A simple 2 metre male to male cable cost a business £6.50. The wholesale cost at the time was £0.60 resulting in the supplier acquiring a margin of 983%.
Summary
We hope that these few points give you some insight on what we have found across the IT (Tech) supply market.
However, unless you find a supplier that is transparent and is prepared to provide evidence of the wholesale costs it is going to be difficult managing costs in the long term and to prove that you are receiving best value
Many Thanks
Neil
P.S. Remember our initial analysis of your purchases is FREE and without any obligation.
Call me now on 01257 232602, use the CONTACT page or email me HERE
At the very least it will give you the peace of mind that you are obtaining good value or provide evidence for further thought and discussion.