Long Term Strategies Focus on Saving Dollars not Cents

Long Term Strategies Focus on Saving Dollars not Cents

Jeff Ritter, MBA - Associated Business Development SupervisorOct 11, 2017
Long Term Strategies

The lowest cost is not always the best value.

We all like to get a good deal, whether it's on a car, our clothes, cell phone, you name it. But is the lowest price always the best? There is a difference between price and value. If you get the lowest price on something, you're paying the lowest amount, which is where the adage of “you get what you pay for” was born.

The lower price could be due to the manufacturer using lower quality products, such as the steel used in the parts of their product. Maybe they cut cost in other ways by using older technology, or by not using the proper testing when the patent is issued, since a patented part or process costs more money to develop, construct, test and eventually implement. We have all been there, where we bought the lowest price product and then had regrets when it fell apart or did not meet our expectations.

A certain portion of value is subjective or based on opinion. Many times, we will pay more for the ease of doing business with a company or a brand name. Sometimes the value is based on features that provide benefits to the user, like a car with all the options. Showing the features of a product that do not benefit the buyer will not generate value or a higher price, but showing a feature that solves a problem could certainly generate a higher value and thus price.

When it comes to good value, the overall price might not be the lowest, but you can rest assured knowing that all the pieces and production methods would be quality. A good example would be Mercedes. They are a brand that you trust to be on the cutting edge of technology and use high-quality parts. Whatever the brand that you go back to over and over, you trust that they are using high-quality parts and labor. Ultimately, you are willing to trade a bit more money for more quality because it will hold up longer over time.

Especially in a situation where you are putting heavy goods away, you want to trust that all of the equipment is going to work as promised and the racking is going to hold the material. You would not want to worry about anything breaking while you are on the job, or that the engineer may have missed something. An example that has played out in warehouses time and time again is the use of cheap parts to fix equipment, like tires and wheel for example. There are plenty of cheap tires on the market today but just because the purchase price was low that doesn’t mean you save money in the long run. Many times cheap tires will wear faster, causing you to replace them more frequently whereas using a more expensive tire that is appropriate for your environment will actually cost less over time. While this might not matter to the purchasing person trying to cut all costs, it would really matter to the operator that has to use the equipment on a daily basis.

Next time someone is looking for the lowest cost think of the recently departed John Glenn who said, “As I hurtled through space, one thought kept crossing my mind - every part of this rocket was supplied by the lowest bidder.” We don’t want to be in a facility with all of the lowest cost items, we want to add value and build trust.

Fleet Management