How to select the right steel supplier?
Should lower prices be the only criteria for selection ?
Should lower prices be the only criteria for selection ?
I often come across situation, when customers want the lowest prices quoted by competitor but want to buy from service provider with the fastest delivery record. For faster delivery, a supplier/ service provider needs to have strong back end team, established logistics partners, good financial health and many other factors. The reality is all of these factors costs money! On an average 1% of sales volume is the cost of maintaining all the above factors in business as per our experience of past 30 years. Now those who are related to steel industry know that 1% can be deciding factor for an order.
Now let’s see scenarios and understand what you as a buyer can do to take the most profitable decision for your organization!
Scenario : Buyer gets 2 quotes from different supplier and he decides to go with the lowest offer instead of the trusted vendor with strong delivery track record.
| Required Quantity | L1 offer (INR) | L2 offer by trusted supplier (INR) |
| 50 MT | 40,00,000 | 40,40,000 |
| Lead time (Order to delivery days) | 7 | 2 |
Let’s assume the Cost of idle machine time/ project delay time as 15 laborers’ costing Rs. 600/ day and idle machine cost Rs. 3000/ day for our convenience. On this assumption, below is the actual cost to buyer including the hidden cost in form of lost man & machine hours.
| Required Quantity | L1 offer (INR) | L2 offer by trusted supplier (INR) |
| 50 MT | 40,00,000 | 40,40,000 |
| Lead time (Order to delivery days) | 7 | 3 |
| Hidden cost to buyer due to delay in supply | 5x [(600*15)+3000] = 60,000 | Nil |
| Total cost including hidden cost | 40,60,000 | 40,40,000 |
You can understand from the above illustration that buyer is not making a 40,000/- loss but actually saving Rs.20,000/- from buying from a good, trusted supplier having good delivery track record. And those in the industry know that not every time it happens that regular supplier’s quote higher price.
To help you understand, below are some reasons for delay in dispatch by the supplier :
- Steel market is highly volatile and suppliers often quote a lower price to acquire orders and wait for market to become favourable before dispatching the material.
- Such suppliers often have skeletal or no backend team, low use of technology.
- You cannot expect lowest price supplier to engage a higher priced logistics partners to deliver the goods! Lowest price logistics partner will arrange transport but certainly accordingly to his whims and wishes.
When you work with a Strong Ethics & Value driven organization such as Agarwal Steel Corporation, you are assured that “What is committed is delivered, and commitment is only done for what can be delivered”
Agarwal Steel Corporation (ASC) is a 30 year old company engaged in bulk supply of steel products like Tmt Bars, Angle, Channel, Beam, Plates, Pipes in Mild and Galvanized Steel to projects, fabricators and sheet metal component manufacturers. ASC counts large cap listed entities as their clients and follow a systemized process for every order ensuring consistent service & product quality to its customers.
If you are tired of following up with your existing supplier for delivery of material or don’t get the dispatch information, you can mail us @ sales@agarwalsteelcorp.com and our representative will get in touch with you for your requirement and help you save money.