Supplier stability – the compressed air industry
March 06th 2009 In a recession businesses must apply the same thinking when making purchases as shoppers do on the high street. In recent months we have seen, airlines, travel firms, even retail perennials such as Woolworths go out of business. When shoppers spend their money today they do so cautiously and spend time researching where they are buying. But just what should you look for when researching your compressed air supplier and where should you look? John Forman of Atlas Copco Compressors provides some basic assistance.
Credibility is key
As documented last year, before the full impact of the credit crunch became evident, Trading Standards concluded that the single most important issue for consumers when choosing a supplier for products or services is credibility.
The report’s conclusions were:
53% of all choices were for supplier businesses that customers already knew or had been recommended by someone they trusted
33% of choices were for supplier firms that had been found through advertising
14% were found through other methods, such as information provided by insurance companies or trade associations
It was with these statistics in mind that the British Compressed Air Society (BCAS) introduced its Trusted Trader Scheme in 2008. The scheme’s aim is to promote the credibility and professionalism of BCAS members as identified by the members’ customers.
When approaching the question of supplier selection, prudent plant or operations management decision makers will need to satisfy all parties in the purchasing chain on questions of the potential supplier’s stability, integrity and track record. Some elementary desk research will establish the financial stability and status of the compressor manufacturer and, where relevant, the specialist air house or distributor who is likely to be the primary contact in any initial purchasing and subsequent installation and servicing negotiation.
This is a necessary precaution because any warranty, no matter how soundly it is constituted, will be practically worthless if the manufacturer and/or sales organisation should find itself in financial difficulties or, worse still, cease trading.
Check out the supplier
It makes good sense to take a close look at the sales organisation’s scale of operation in terms of capital base, production facilities, technical achievements and the human resource involved. Assess, if possible, whether there is sufficient capacity to meet present and future demand. Money spent on confidential investigation of such key facts may prove to be a wise investment if as a result it forestalls a wrong decision in supplier selection.
It has never been easier to seek out the critical financial information that is key to supplier selection than it is now. Search costs are insignificant in relation to potential capital expenditure. For instance, Companies House will supply financial records for as little as £1 per document and the internet is populated with many websites offering search services that provide individual reports on UK company directors, stakeholders, assets, profit, performance overview, ‘insights’ and much more for less than £20 per time, and equally can submit similar financial data on overseas organisations. All of this data is available to purchasing management in an instant via the internet.
Financial insights are not the only information germane to the choice of supplier. Here are four check questions that help in evaluating the potential compressed air supplier, the equipment capability and its known performance:
Location: does the supplier’s distance from the planned installation site adversely affect the price structure for equipment and service?
Can the potential supplier provide tangible evidence of performance claims, i.e. proof statements, test cell verification or even on-site performance tests?
Can reference installations of the same or similar specification be visited and interrogated?
What is the manufacturer’s policy on continuity and security of future parts and service?
The ethos of the potential supplier
There are other important pointers to consider when it comes to confidence in making the right supplier choice. These are more about the ‘feel’ of your compressed air supplier.
For instance, is their image profile being maintained where it could reasonably be expected to be visible, such as editorials and advertisements in trade media or appropriate websites? Also, is their website up to date? After all, when a company dramatically reduces its marketing spend it invariably is a sign of either short-sighted management or financial ills.
Another indication of a supplier’s trustworthy stature is its expected membership and influence within a recognised trade body. In the case of a compressor manufacturer or distributor that would mean a prominent association within the British Compressed Air Society.
The professional buyer’s advice
The Chartered Institute of Purchasing & Supply (CIP&S) recognises that capital item purchases, such as compressors, inevitably feature high initial cost, are frequently one-off transactions by managements without prior experience, and can be subject to lengthy and difficult negotiations involving a high level of input from technical/engineering personnel.
Because of this commonplace scenario, the CIP&S confirms that the choice of supplier is always critical and that a long term relationship with the supplier organisation is necessary to ensure continuity of performance, of future replacement availability, of correct maintenance, and of technical and support.
So it’s clear that evaluation of your compressed air supplier’s viability and stability is essential to every capital item purchasing decision. So do the research, check the facts and make the right choice.
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