type79@ix.netcom.com wrote:
>
> The lister questioned the profit margin on parts sourced from Asian suppliers
>and
> theorized that it is far greater than the profit margin from European
>suppliers. If
> this is true, he commented, why don't the retailers selling these parts pass
>on the
> savings, or to put it another way, apply the same markup to these parts
>rather than,
> for example, selling the $5.00 part for $20.00?
IMO, the vendors generally do pass on the actual savings, in the form of
not multiplying prices to match what the European suppliers want to
charge.
Consider :
You (as a vendor) go along happily for years, buying parts from a
particular supplier. There are a few price increases, but nothing
major. Then, something happens. Either the tooling wears out, or the
supplier gets bought by someone else, or the only guy that knew how to
keep "Ol' Betsy" running retired, or whatever. All of a sudden,
supplier 'A' says "Sorry, we can't supply that anymore".
No problem, you've got a secondary supplier identified. Except, when
you contact them, they say "No, we haven't made those in years, because
we couldn't match supplier A's price. Now, there's not enough market,
we won't be tooling up again." Or, "We won't tool up for any less than
10,000 items" while you sell maybe 300 a year.
So, you hunt around for other suppliers who still make the part, only to
find there aren't any, or they want to charge 5 times what you've been
paying. That would really PO your customers.
Ok, you're in a tight spot, so you make up a drawing of the part, and
start shopping for someone to reproduce it. Well, amazingly enough, the
places that are hungry for work are all in countries like China. You
find someone there that says "Sure, we can make that", look at a few
samples (not of your part because you'd have to pay for the tooling
first), and give them an order for maybe 1000 of them, at about the
price you've been paying, payment on delivery. When the shipment comes
in, you examine the parts and find they are reasonably close in fit and
appearance, so you OK payment and stock them on the shelf.
But, 6 months down the road, you notice that your return rate is
unacceptably high, like 50% (it's really amazing how many people either
never use the parts they buy, or never complain about receiving crap).
You try to contact the vendor, who (if you can find them at all) says
"So sorry, no returns".
Now, you're stuck with 850 unsaleable parts and no recourse. (It's
almost impossible to sue someone in another country, especially one like
China.) So, you dump the parts in the scrap bin, start the acquisition
process over again, and add the money lost on the scrap parts onto the
price you charge for the next version.
'Tain't all beer and skittles, being a vendor.
Randall
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