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Understanding Purchasing
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Understanding Purchasing
Date: 11-05-2017

There is no such thing as a free lunch.

In an increasingly competitive UAE market, where more suppliers are vying for business, professional buyers need to cast aside the red herring of perceived lower chemical prices and focus more on the total value of the package they receive from the supplier. Forthcoming blog posts will examine some of the hot commercial topics on making the right chemical supplier choices, but here we set out our stall. 

When considering cost control, buyers and sellers should not get so hung up about the price of the product, and need to work closer in understanding the commercial factors involved in a responsibly-built supplier relationship. How many times have salesmen sat across the table from the buyer and been asked “how much does this cost?” Invariably, sellers and buyers are not talking the same language, where one talks of cost and the other only wants to talk price, and they are two very different things. 

We spend endless hours involved in preparing tenders and quotations, where a bottom line spreadsheet number sometimes dilutes the real benefits being offered and understood. Businesses need to focus on reducing chemical consumption more rather than focussing on reducing the lowest prices, because as we know, in many cases, this race to the bottom on price normally leads to a false economy in the long run and wasted time and money.

Businesses need to stamp out wastage and insist on their suppliers and staff, respectively, getting as much out of the bottle as possible, not as little. Where the industry increasingly talks about sustainability in environmental terms, ultimately commercial sustainability is more important. The reality is, without it - there is nothing left to talk about.

If businesses receive efficient and regular site service levels, good quality professional grade cleaning products vended through robust and well-maintained dilution systems, most can expect to cut consumption of prepared cleaning solutions by 30 per cent. If this can be achieved, then the price of the cleaning solution delivered in the bottle becomes increasingly unimportant (within reason, of course). It is a simple premise if the volume used decreases, then so do cleaning costs – period. 

Whilst many chemical suppliers provide so-called ‘concentrated products’ with dosing systems, it is clear that on closer inspection many of these chemicals are what we would describe as ‘normal-strength’ or ‘me-too’ products, providing only one part of the benefit equation – control. This approach ignores the key aspect that higher active concentrations will certainly be more expensive in terms of price, but will ultimately reduce waste, if used correctly.

Should we be ashamed of making a profit? Absolutely not. Our customer’s businesses make profits and a healthy and sustainable commercial relationship is key for all parties involved. We are all in business to make money. For Arpal Gulf, it is the long-term value gained from our customers that is far more important than the ‘quick-sale-commission’ based mentality of certain companies in our sector. Reputable chemical companies should be ‘reassuringly expensive’ because to provide the benefits most professional customer businesses demand, it needs to be paid for. We operate where service matters most – not least.

It is critical therefore that the supplier must focus on the commercial viability of prospective opportunities, because the provision of free-on-loan dosing equipment can be an expensive business if not managed properly. Suppliers who offer below market unit pricing just to get the sales can get badly burned financially if they get their account viability equation wrong. 

So, it is important that the assessment as to whether a dosing system installation is suitable or commercially viable needs to be well thought through, otherwise the customer may be receiving a Rolls Royce system when a Mini Cooper may fit the bill better. 

In certain quarters of the cleaning industry there is a ‘difference of opinion’ on the relative price charged for chemical products suitable for controlled dilution and the actual cost-in-use. The reputable suppliers’ chemical price quite simply should support the cost of the associated equipment and engineering support, training and regular service calls, and yield a reasonable profit, whilst delivering savings to the client. 

For any supplier, return on investment is the key consideration - there seems little point in installing expensive dosing equipment on a free-on-loan basis, if the chemical product is being sold at a nominal commodity price to the end-user. It is not because manufacturers are greedy or trying to pull the wool over unsuspecting customers eyes, it is simple maths. 

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