There are several opportunities to maintain or increase profits, and one that is often overlooked is negotiating with vendors. Vendor negotiations go beyond delivery times or buying parts and materials at wholesale prices. You can negotiate any portion of the process to make your business run smoother and more profitable.
One of the first things to negotiate is price. Parts vendors generally offer wholesale pricing to collision centers, but some deserve more.
Saving the vendor time by using electronic parts-ordering systems like OE Connection's CollisionLink should allow you to negotiate a better discount.
These ordering systems not only make your parts order more efficient, it verifies that you are ordering the correct part. This also saves your parts vendor the time it takes to process incorrectly ordered parts, as well as protecting their return reserve.
This process also can work with your paint vendor. Paint vendors also have begun to utilize electronic ordering systems associated with Kanban inventory control processes.
It allows you to submit an online order by scanning a Kanban card for the product you need. You submit the order at a scheduled time, which allows the vendor to fulfill one order, produce one invoice and make one delivery trip to your shop. The savings to the vendor for efficient ordering should warrant an additional discount.
Another tool to use is the parts purchased report from your management system. You can visit a parts manager and show them how much you spent with them during the previous month.
Most management systems will let you run a report by vendor for a selected period so you can negotiate a better discount through purchase volume. Using the by-vendor report combined with a report that shows your total parts purchased during a month will show the parts manager the percentage of parts you purchased from them.
The higher percentage of total parts purchased should help drive a higher discount. This will also work with your paint vendor, using your materials usage report you can prove your loyalty to earn a volume discount.
As shops are getting deeper into lean processes and performing complete tear-downs, their supplement ratio is lower. A low supplement ratio causes concern regarding parts price differences because a shop might absorb the difference rather than submit a supplement.
This brings up another negotiating opportunity. Include the parts price allowed on your damage appraisal when you submit your order. Explain to the parts manager the lengths you have to go to get a parts price difference paid. Then ask him to match the parts price provided on the parts damage appraisal.
The amount of difference matched would be part of your negotiation. You can pick a specific dollar limit for the price matching and then ask that you be notified immediately when that limit is reached on a particular part. This will give you time to create a supplement prior to receiving the part, giving you opportunity to get paid before the vehicle leaves. Educating your parts vendor on your needs is a positive step in realizing better profits.
This same process can be used with your sublet vendors. Negotiating discounts for front-end alignments and towing through volume purchasing can bring great benefits to your bottom line.
The more you can purchase from one vendor will increase your negotiating ability. The surrounding theme in this article is loyalty. You might save on a single item by purchasing it from a specific vendor, however, if your regular vendor has the product, it might work out cheaper in the long run by negotiating a volume discount.
You will also find it is easier to contact one vendor for your purchases than it is trying to remember who you buy what from to get the best price. Your vendors will appreciate the loyalty and you will appreciate the increase in net profit.
