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Number of suppliers

woody

CGF, Certified Grumble Framer
Had an interesting conversation the other day with a rep that is still causing me a great deal of reflection on where I am and where I am going with my business. One of the topics was about the number of suppliers framers use. Specifically, moulding suppliers. Counting up I find that I use 8 suppliers (nine of you count the Victor spinoff chop service) as well as 2 or 3 local distributors at various times and for various amounts. My rationale is that each has something different to offer that helps my sample wall look a little different from the guy down the street. What's the thoughts of the board on this subject? Is fewer better? Is there money to be saved, headaches to be avoided by using fewer suppliersd and do the advantages outweigh the supposed pluses?
 
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Bones

Guest
Woody nothing wrong with diversity,I carry 10 different moulding co. and each has alot to offer and clients are always saying what a nice selection I have and it gives me a good range of prices to work with also, some of the companies carry some of the samples others do in case one or the other is out I can get the same thing from another so it works well for me. For me it works well to have a 30day net with some and c.o.d. with others that I dont order from as often. Two of the mo. co. have their own trucks that come in to town every week so it saves me cost on shipping as well and I get my matboard from those two as well as glass and other supplies, anyway wish you well Bro. Bones
 

MerpsMom

<span style="color: red"><b><i>Charter Member</i><
I also choose to have whatever I want from as many as I want, but know there are those out there who feel two or three is definitely better. Hope they tell us why, other than that they get a 40% discount!! if they buy it all!
Frankly, I don't notice a lack of service from those not frequented often.
 

ArtLady

SGF, Supreme Grumble Framer
My husband is a management consultant specializing in production and inventory. Companies use his services to make them more profitable. His explanation to the question above is twofold.

1. Economies of scale.
2. Decreased shipping costs.

Both of these can make major differences in the gross margins.

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Timberwoman
AL
I cut the mat, I pet the cat.




[This message has been edited by ArtLady (edited 04-09-2000).]
 

TADPORTER

MGF, Master Grumble Framer
I use 4 diff. mould companies. One is my main source who I also use as a dist for mats and glass, etc. This company accounts for about 70% of my COG per month.

I also have a few finished corner samples from a company out of NY. Thirdly, I have about 200 ROMA samples which I really love. Most of you I am sure are quite familiar with them but they are new to me and serve as a higher end option when appropriate.

The fourth manuf. I use is also a full dist. They provide free shipping once a week and their cutoff is one day after my main supplier. I can often fill any holes left by OS materials from the main supplier. They also offer a moulding line which is a collection of many moulding manufacturers which provides yet more diversity on my wall.

These four groups provide an interesting and unique sample wall collection which sets me apart from the chains. Shipping costs are a concern but I work that into the retail. Apologies to go on and on but I feel diversity and creativity is ultimately my most powerful selling tool and customers will come to me specifically for my unusual collection of mouldings. I wont hesitate to add more moulding lines.

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"I haven't been to Michigan since the last time I was there." -Dan Quayle
 

Mel

MGF, Master Grumble Framer
Woody,

Would you share the substance of the conversation with the rep that is causing your reflection?

For the record, your situation and reasons mirror my own almost exactly. In my case, shipping costs are not an issue, as I have to pay all shipping costs from all my sources. The "economies of scale" needs to be explained to me. I always jump to the conclusion it really means I'm too lazy to deal with complexity. People don't pay consultants for bad advice (usually), so there must be a better explanation.
 

BUDDY

PFG, Picture Framing God
Mel;
I agree with your post so maybe if it doesn't cause ArtLady's husband any problems he could explain these two points.
I actually use only three suppliers ( it used to be four but since LJ bought out DeCastro).I used these mostly because they all had warehouses in town and I could get what ever I wanted in a matter of minutes.However I have been wondering if I could get any benefits from changing my major supplier . This has become especially important since DC was the bulk and now I am afraid LJ is about to drop a bunch of their profiles ,which I guess is a good argument for diversification .i.d. When the DC lines go my wall will be very bare unless I make some changes before.
BUDDY

[This message has been edited by BUDDY (edited 04-10-2000).]
 

MerpsMom

<span style="color: red"><b><i>Charter Member</i><
Dan Quayle is good for a lot of those! I posted this to another Grumbler: thought it fit me sometimes: "A bus station is where the bus stops. A train station is where the train stops. On my desk, I have a work station."
 

ArtLady

SGF, Supreme Grumble Framer
Hi Buddy,

I assume you are referring to the term economies of scale.

Basically, this means the more you buy the bigger discount you get, plus there is less paperwork, less phone resources, less time consumed, etc.

He is always telling me that I should cut down on the number of suppliers I use, but it is reallllllllllllllly hard to do that with all those big beautiful TIMBER frames out there!!!! I have to have every one on my wall.

Talk to you soon.

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Timberwoman
AL
I cut the mat, I pet the cat.




[This message has been edited by ArtLady (edited 04-10-2000).]
 
J

James Miller

Guest
The best reason to give most of your business to just a few suppliers is that you become a more important customer to them. You are more likely to get free or discounted deliveries, favors, and greater-than-earned quantity discounts from suppliers to whom you make a significant commitment -- even if you're not among their big customers. A fancy term for deep business relationships is "partnering".

A "significant commitment" is more than dollars spent. That also includes prompt payments. Distribution is a very capital-intensive form of business. Distributors will do almost *anything* for a steady customer who earns prompt-payment discounts and buys a wide range of items. We earn prompt-payment discounts most of the time. Our suppliers love us for it, and respond when we ask for a little extra.

That's another thing -- if you expect to get extra consideration, you have to ask for it. Suppliers usually don't go looking for chances to give discounts or other concessions...if you're happy the way things are, they're happy.

"Economies of scale" means that it is better to buy 100 orders from one supplier, than to buy 10 orders from each of 10 suppliers, because:
1. When you consolidate, the chosen supplier sees more of your dollars.
2. Each order costs nearly the same to initiate and process; if orders are bigger and fewer, you save administrative costs.
3. Less to keep up with, in terms of price updates, discountinued items, etc.
4. Bigger orders earn bigger discounts, free or discounted freight, and whatever other incentives you might negotiate from suppliers.

This concept doesn't apply to the framing industry as well as it does to most others, because most of us retailers are so small that *all* of our business wouldn't be enough to get us big concessions from a manufacturer or distributor.

"Decreased shipping costs" may or may not be real, depending on where you are and who delivers in your area. But regardless of location, if you buy moulding in a box of 200 ft., it will cost less per-foot to ship than if you buy chops or a few lengths at a time. That's an example of how consolidating orders saves shipping cost.

Whether a frame shop should consolidate business to just a few suppliers depends on total volume, customer mix, "target customer" profile, location, competition among suppliers in the area, and other factors. Everyone's situation is different, but most of us could save cost/add profit, one way or another, by using fewer suppliers.

Here, we keep about 3,000 samples on the wall. About 30% of them are from one big, out-of-town supplier; about 30% are from another big, local supplier (both of whom deliver free twice a week); and about 40% of our samples are odds & ends from 3 other occasional suppliers. We have plenty of variety, but 80% of our business goes to 2 suppliers.

No matter how many samples you have, or how many suppliers' products you promote, you can still concentrate most of your business into one or two that would respond to an extra commitment on your part. That is, *if* you have suppliers that would respond to such a commitment. You have to ask.



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Jim Miller,holder of CPFcm designation; FACTS/GAFP Committee Member
 

MerpsMom

<span style="color: red"><b><i>Charter Member</i><
Good analysis, I think. I'm a sucker for a concession on the part of a supplier, and feel really justified in gritching from one if I buy a lot. My LJ rep set me up on a seven-chops-free-freight and I've been hooked. (Of course, I SELL a lot of the stuff anyway, but this way I can get those huge 50 x 60 5" mouldings AL likes as well as I and the rest of us, and get them shipped for nothing!) One of my locals has become a real asset and just because I buy most of my boards, glass, and f/c from him, I get little extras like samples, advice, sympathy, and terrific service to boot. There's never a question about twice-a-week delivery--even if just one chop--so making a great association with someone can pay big dividends. However, that said, there are still some mouldings that just MUST come from others, and sadly, I can't pare down to three or so. (Can I say "Price Increase"? As a matter of fact, yes.)
 

ArtLady

SGF, Supreme Grumble Framer
Dear J Miller,

Thanx for the absolutely wonderful explanation. You really put a lot of thought into your response. It was a pleasure to read.
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Timberwoman
AL
I cut the mat, I pet the cat.




[This message has been edited by ArtLady (edited 04-10-2000).]
 

Mel

MGF, Master Grumble Framer
Yes, thanks, Jim,

You include several critical points in your analysis including the fact that custom framing doesn't fall neatly into the concept due to the fact most of us are small by manufacturers' standards. A point I would make is that some of us are even much smaller than small and our target customers are everyone in our small towns, so diversity prevails to provide price and quality ranges. Because of that fact, shipments of 200' of one moulding seldom are worth the inventory space and prayers that they'll be used. Than, of course, very small isn't very interesting to distributors and nmanufacturers, even if we do always take advantage of prompt-payment discounts. And, due to some of our personal choices of location, free shipping is not offered at all, so there is no incentive to them there. All of this goes to another string here on TG about cost of goods. It seems we're often talking apples and oranges on that one, too.

Your points are good and well-taken, Jim. This is another of those great discussions that enlightens, but also highlights the vast differences between the business circumstances of members of this profession.
 

John Ranes II CPF GCF

SGF, Supreme Grumble Framer
Woody,

We went through this anaylsis about 2 years ago, and were in a similar situation.....buying from about 12+ vendors in a mixture of length and chop.

We knew that pricing in this industry enables us to "spread" our business among many distributors and still make a healthy profit. This enabled us to "create" that interesting and unique selection that Tadporter spoke of.

After all, don't your best employees and frame designers grab that corner sample that looks great and excites them? This passion transfers and illicites excitement on both sides of the design counter. This in turn leads to completed sales/transactions, so who can argue with that philosophy?

I guess I can, as I also recognize, that "balance" is what we're trying to achieve. We'd like to have a large enough differsity in selection but with a realistic number of vendors. James Miller so adequately described the "economies of scale" that we also decided to incorporate. We ended up paring down our vendors to three "primary" and three "secondary". The Top Two actually now garnish about 90% of our sales, and the "Secondary Three" are displayed on trays under our selection table.

Some less perceived values of "ecomomies of scale" include:
<UL TYPE=SQUARE>
<LI>Number of phone calls made in ordering, solving problems of chops & invoicing.
<LI>Frequency of Sales Rep contact increases substantially when you have "value" to that rep.
<LI>Larger delivered orders tend to lessen the risk of damage to chops in transit, (as a percentage).
<LI>You are simply more apt to take the dated discount on 10 invoices of $250-400 each than 30 invoices of $50-$100 each!
[/list]
John

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______________________________________
The Frame Workshop of Appleton, Inc.
www.theframeworkshop.com
Appleton, Wisconsin
jerserwi@aol.com
______________________________________

[This message has been edited by John Ranes II, CPF, GCF (edited 04-11-2000).]
 

John Ranes II CPF GCF

SGF, Supreme Grumble Framer
Buddy,

Related - You'd best explore new vendors I think. I overheard someone mention at the Dallas ABC Show, that LJ was showing the DC items to only existing DC accounts, and not to new or other LJ accounts.

Sounds to me like it's days are numbered(?)

John
 

woody

CGF, Certified Grumble Framer
Mel, most of the conversation revolved around my own particular challenges. I have seen a substantial drop off in business over the past 18 months that is causing considerable reflection and second guessing on my part. I am trying to examine all aspects of the way I do things in an effort to redirect my focus. The number of suppliers discussion was just part of the general conversation. Obviously, any rep would prefer a customer to deal only with him but this one did accept that for the sake of variety more than one supplier was necessary. In Salt Lake City we have seen two distributors go out of business this year leaving a very narrow choice for most common lines and the supply has been spotty at best. Hence the discussion of perhaps focussing, or narrowing down to one or two reliable suppliers.
 

ArtLady

SGF, Supreme Grumble Framer
Hi Woody,

Have you tried looking back to see what it was that you did that got you to your high point? Then consider going back to those old ideas. We always have a backup plan and go back to that strategy at the sign of any weakness.

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Timberwoman
AL
I cut the mat, I pet the cat.




[This message has been edited by ArtLady (edited 04-12-2000).]
 
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