Andy McQuade
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Basket of Building Materials

How Companies Lose When Buying Direct

I cringe when I hear customers talking about what about great deal they made on x project by buying materials directly from the manufacturer.

Taking over

Well, why can be a number of things. The number one question that comes to mind is “do you go to a chiropractor to fix your teeth?” No, I go to someone who fixes teeth every day, because they are good at it. They are called dentists. So why are companies that succeeded in development, construction, or property management suddenly trying to become distributors of building products?

What you’re taking on

Adding complexity to your business rarely works out long term. With more things to coordinate and balance, there are more opportunities for things to go wrong. Also, with “more hands in the cookie jar” there are more mouths to feed and more crumbs that wind up on the floor.

Complications

When you eliminate dealers, you also dilute your buying power. Everyone in building materials sales has heard the line “I have relationships and like to spread the wealth around”. While relationships are the lifeblood of our industry, the reality is this approach can get expensive fast.

  • It increases overhead — Outside of just diluted buying power, more vendors mean more deliveries, more deliveries mean more labor. Labor to meet each delivery separately (or worse, driving to multiple locations to get product!), Labor to check the product in, and labor to pay the bills all increase.
  • It increases workload — In addition to the above, you also have to spend time communicating to more people. Managing more vendors will always increase the time invested in planning and scheduling.
  • It increases exposure — More visitors means more risk of injury on the jobsite, as well as more potential delays. Additionally, it creates opportunities for things to slip through the cracks, costing money on the project. Product has a way of disappearing on chaotic jobsites, and the costs of other, smaller issues can pile up quickly and crush your budget.

Leverage Your Strengths

The final, determining factor should be “how much buying power and leverage can we get if we spend $500k annually at one supplier, instead of spending $50k each at 10 different ones?”

Where to Start?

If you or your team is overwhelmed by the options on the market and flood of information available, I can help. Contact Me and let me know what issues you’re seeing.

Father, Husband, Consultant, Small Business Owner in Rochester, NY

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