Managing Costs on IT products and equipment is extremely difficult for organisations.
Independent survey reports, analysis of purchases and consistent client results support the fact that 81% of organisations will pay more than they should on everyday tech products.
Resellers, suppliers or however you identify them have and continue to use a number of factors to leave you out of pocket.
So, what are they?
Managing Costs – Factor 1 – Resistance
Every tech item you purchase consists of a wholesale cost and the supplier margin.
Over many years suppliers have resisted the call for cost transparency, to show the wholesale cost of a product and disclose their margin.
A cross-sector report after the pandemic found that the highest individual margin was 1456%, which demonstrates the scale of the problem.
If you would like to read the full report, you can download a copy HERE
Managing Costs – Factor 2 – Manipulating price movement
Wholesale prices move on a daily basis, as the example below demonstrates.
Analysis shows that price drops are not passed on to the customer and yet all increases are but at a much higher value than the increase in the wholesale market.
Both actions protect and inflate the supplier margins while the value of the customers’ budget reduces rapidly.
The screenshot below clearly shows how prices move on a daily basis and that gives suppliers the opportunity to increase their margins.
We have constant access to this level of information.
Managing Costs – Factor 3 – Limiting Price Validity
With very few exceptions, quotations are only usually valid for a few days.
As it can take this amount of time to obtain replies from all your suppliers when you are ready to make a decision to place an order the quote is invalid, and the result is usually an increase on the initial price that was quoted.
Try to give suppliers a specific day when they need to submit their responses. This will give you time to review them while they are all still valid.
Managing Costs – Factor 4 – Low-Value Items
There will be many items that present a purchase price of £20 or below.
For very good practical reasons they do not attract much attention and usually do not require any authorisation.
The problem is that it is on these items where we see the highest supplier margins.
The value of 1456% quoted above was on an HDMI cable.
Suppliers know that low-value items are not scrutinised and use this to their advantage.
Summary
We hope that these few points give you some insight on what we have found across the IT (Tech) supply market.
However, unless you find a supplier that is transparent and is prepared to provide evidence of the wholesale costs it is going to be difficult managing costs in the long term and to prove that you are receiving best value.
Understand that we provide a FREE initial analysis of your purchases to help you be aware of the level of value you are receiving.
At the very least it will give you the peace of mind that you are obtaining good value or provide evidence for further thought and discussion.
Neil Grime | UK Business Advisors (ukba.co.uk)