Most small businesses need a technology supplier. If you are not savvy, you could be wasting 30 per cent of your budget by paying too much. To reduce costs, you need to understand how the supplier margins work.
There are two simple elements to a supplier margin: the wholesale cost and the price you pay for the IT item you need.
Technology suppliers will pay a distributor the wholesale price, and then you pay the price the supplier agrees to sell you the product for.
The margin is the difference between these two values.
When technology suppliers set very high margins, they can inflate your costs and reduce the effectiveness of your budget for IT and tech products.
Here are some actions you can take both internally and with your suppliers:
- Minimise The Number of Personnel “Buying”
They might think they are helping, but having too many personnel buying is damaging. They are using valuable time searching through a technology supplies catalogue. Time better spent on their core tasks. Someone might occasionally find a nugget of a deal on Amazon, but it will be the exception rather than the rule.
- Develop Your Supplier(s)
Whether it is technology supplies for schools or private companies, look to have open discussions with your technology suppliers about the need to move to a transparent relationship. All suppliers can provide evidence to confirm the wholesale price they are paying. This evidence can be a screenshot from the distributor channels or a copy of the invoice. If you meet resistance, find suppliers prepared to work with you. Consider sole sourcing to make your business more attractive even at an agreed lower margin.
- Watch The Small Stuff
The range of products is vast. Everyone always focuses on the big-ticket items. But it is low-value, frequent purchases that do most of the damage.
Everyday items like keyboards, mice, printer cartridges and HDMI cables are consistent culprits. You might consider the values insignificant but understand that margins value of 100’s of per cent quickly add up.
We hope that these simple points help you to make a start.