distributors as partners
Call it a partnership, an agreement or a relationship. Whatever you call the arrangement between commercial/institutional facilities and distributors of supplies and equipment, managers are going to greater lengths than ever to fine-tune these relationships and maximize their purchasing power.
The reasons for the increased levels of attention are many – price breaks, better service and greater reliability. What matters most to managers, however, is that the relationships result in more efficient and effective maintenance.
Getting the most from this mutually beneficial state depends on how the relationship is structured and the benefits managers expect.
Getting the Best Deal
The structure of the relationship between distributor and maintenance and engineering department varies considerably among facilities. Syracuse University uses standing orders with several distributors, says Kevin Kenyon, director of the physical plant. The standing orders are comprised of a purchasing relationship and a price structure. They are basically an open account with a distributor for a set amount of stock for an agreed-upon amount of dollars. They are usually revisited annually, but some are established for up to three years, Kenyon says.
The university’s purchasing department works out pricing details of the standing orders, based on specifications Kenyon supplies. New bids are put out when an order expires. In New York City, the 3.5 million-square-foot Mt. Sinai Medical Center has structured its arrangements with distributors in a way similar to Syracuse’s.
The agreement the maintenance department came to with its distributor of filters is a blanket order, says Richard Detlef, the hospital’s chief engineer.
"We project what our costs for 12 months of filters will be and make out the blanket order for that amount," Detlef says. "Then we draw against that order throughout the year."
After a bidding process featuring five or six distributors, the purchasing department chooses one based on Detlef’s specifications, as well as the price and the quality of the products. The final factor in the decision was important to the maintenance department staff – that the distributor agreed to hold or stock filters for the department, which doesn’t have enough room for such inventory.
Clifford Riley, director of utilities at Brigham Young University (BYU) in Provo, Utah, also has worked out year-long – and longer – agreements with distributors. The purchasing department closes the deal based on Riley’s specifications, with prices based on the distributor’s cost plus a percent increase.
Price is a central attribute of a successful long-term relationship between an organization and a distributor, but it isn’t the only one managers look for. Responsive, reliable service is one attribute that maintenance professionals point to as essential in their long-term distributor partners.
"Price is a major thing, but if we are comfortable with a vendor or if they really know our operation well, we can go beyond price," says Syracuse’s Kenyon.
Riley says one distributor partner includes off-hours emergency service as a part of its agreement with BYU.
"We had an underground valve that broke on the weekend once," Riley says. "We went in and dug it up, called the distributor, and he went in opened the store and brought the part out to us. That’s service." Joseph Clements, coordinator of utility services for Fulton County School Systems in Atlanta, believes service to his 65-school system is as important as price.
"We look for and expect a quick turnaround time from our distributors or we don’t do business," he says.
A good distributor also should stock items on a seasonal basis so facility professionals don’t have to wait.
"Our distributors know our purchasing habits, so they stock up with items when they think we’ll need them," Kenyon says. "This gives us quick access to the parts we need."
Allan Espenlaub, facility manager at the Denver Museum of Natural History, has maintained a number of partnerships, some as long as 30 years, but they have not been written or contractual ones.
"We develop and maintain successful partnerships based on past performance," Espenlaub says. "Our distributor partners know our system and our facility, and know the kind of quality of products we demand. This is worth more than a few pennies we might save by bidding one distributor against another all the time." He checks his partners’ prices to make sure he gets a good price, but price has never been a problem because distributors will meet whatever prices the museum needs. He has arrived at this understanding because of the long-term relationship with the distributor.
Facility professionals also seem to strike up relationships with distributors that have a strong knowledge of their customers’ inventory.
Clements says he looks for a price break and quick turnaround time from any distributor interested in doing long-term business. But just as important, if not more so, is the technical knowledge of the distributor’s staff.
"I like to know there is a technical staff that knows its inventory and can help us find something – a part – similar to the one we bring in when the part we bring is no longer made or not in stock," he says.
The Bigger Picture
Once a manager has become comfortable with the price, service and knowledge of it distributor, he or she can take one step farther by making the distributor a big-picture partner.
Riley, for instance, includes his distributors in the bid process for capital projects. He says doing so keeps parts and systems standard on the campus. Otherwise, a general contractor or subcontractor might bring in parts or systems that are either not used on the campus or that might be difficult to replace.
Partnerships can have their downsides. One such downside, especially these days, is mergers. "You can rely on a distributor that offers all things, and the next thing you know it falls right off your radar screen – it was bought or merged out of existence," Espenlaub says. "That may leave you holding the bag because you did rely on that one distributor. Hopefully if it was an open partnership and your partner knew of the merger, he would say something."
A relationship that gets too comfortable can lead to problems. Ed Walsh, associate director of plant engineering at the Mt. Sinai Medical Center, says his institution’s purchasing department offers a necessary buffer from that. Walsh adds that maintenance departments can suffer if they get too comfortable with their distributors.
"There’s a benefit to developing a regular relationship, but there is a reason why we have separated the purchasing from the specifying," he says. "It’s too easy to get too comfortable." Despite the caveats, some maintenance and engineering managers see long-term relationships with distributors as a trend in business.
"Developing a partnership over time and receiving the benefits that brings vs. always having to be competitive – this is the way all of business is heading," Espenlaub says. "There are efficiencies built into an economic model built on the cooperative approach that are not available to models built on the competitive market approach."
The preceding article is printed with the permission of David Kozlowski, Senior Editor, Maintenance Solutions magazine.
© 1999 Trade Press Publishing Corporation