What is quality? And once defined, how important is it to you and your business? On one side there is the quality of the products you purchase and resell. And there is the quality in service you receive from the suppliers of those products. On the other side there is the quality of your name and how customers perceive your company. If every other purchasing decision factor were equal, we would all choose the highest quality available. But that is never the case. Higher quality means higher price and consequently our buying decisions are made on perceived value. How good is good enough?
Product and Service Quality
For automobiles there is the annual JD Power report and rankings. For 2010, the bottom ranking for cars sold in the US was Land Rover with a score of 145 (or 1.45 initial defects per vehicle). The average was about 110. What is interesting in this is that ten years ago, a score of 180 would have gotten the car an award. The market has forced all manufactures to vastly improve their products. While JD Power does not do a similar report for our industry, the same buyer driven requirement has impacted just about all industries including food service equipment. Whether it is an oven, an exhaust hood, or the custom stainless fabrication in an institutional kitchen; in today’s market we expect it to work and pass the health department inspection.
So buy the cheapest, right? Right! Why wouldn’t you? The tough part here is that the dollars on a quote really aren’t the definitive price for the item. Take the custom stainless steel fabrication on an institutional job. While there are basic equipment and labor skill requirements to produce the products, we are not building Cray computers. Most of the companies that compete for this business and have made it through the recent economic downturn have the necessary machinery and people in place. Some savings can be realized through engineering expertise, labor and material saving software and, for larger companies, volume material purchasing advantages. But once the job gets out to the floor production costs become similar. Why then might you see as much as a 20% or even 30% difference in the quoted price on a job?
First, compare the quotes. Is everything included? Are there exceptions noted? I can’t tell you how many times I have seen one (or more!) complete items omitted from a competitor’s quote. When all that is compared is the bottom line total dollar number, this can make a big difference and it is a cost you will need to make up to finish the job. The other more common area for reducing a company’s quoted price is in the intangibles. Functions you may feel are a given; site measurements, entrance clearances (to get the products into the kitchen), solid surface installation and finishing, internal product wiring and/or plumbing, NSF compliance and stickers, material tracking and paperwork for LEED certification needs, supplier contacts that have or can get information your project manager needs as the job progresses, on time delivery, and many more that will come up on any given job. All of these have a cost to the supplier and if the low bidder’s response to each inquiry is, ‘That wasn’t called out in our quote and isn’t included’ then the cost becomes yours. The best answer is to know who you are dealing with and what you can expect from them. Low quote price does not directly correlate to lowest cost.
Your Customer’s Perception
Just as your buying decisions are made on perceived value, so to are your customer’s purchasing decisions. Much of your reputation is based on the performance of the products and policies of the companies from which you buy. Are you in business to make on-going quick one time sales based solely on low price? Or is your business strategy to form lasting relationships and to grow with your customer’s success? Do you believe the studies that show it is far more costly to find a new customer than it is to retain a current account? EMI adheres to the latter two. We choose to be a responsible business partner that is interested in doing what is required to grow our customer’s business. We see the best route to that goal as being 1) through engineering and procurement expertise, be the low cost producer, and 2) as standard business practice, provide the support needed for your customers to grow and prosper through their dealings with you.
How good is good enough? Why chance it. Your lowest cost on custom fabrication comes from a company that knows and quotes what it takes to satisfactorily complete the job to your customer’s satisfaction. EMI