Suppliers need to adapt to contractors' world

Dateline: 24.03.2010
Author: Brian Clark*

Suppliers to the cleaning industry are quite vocal about the lack of transparency and apparent rationality in purchasing decisions made by cleaning contractors when choosing equipment, chemicals and accessories for new and existing contracts. INCLEAN decided to have a closer look at this issue and canvassed the opinions of major suppliers of equipment, chemicals and accessories, as well as a business consultant specialising in this industry. Their responses are undoubtedly fuel for ongoing discussion.

The equipment supplier - 'always the cheap option'

According to a major equipment supplier, the most typical mistake contractors make is a purchase based purely on price, with no consideration of whether the purchase is substantial enough for the job.

They often buy the wrong machine for the job with no consideration of the supplier's ability to support it, or buy the wrong machines completely. An example he put forward was a contracting firm that purchased a 400rpm swing buffer and a wet/dry vacuum to scrub a school gymnasium, despite the fact that he was told that the machines were far too small for the application. The decision was again related to upfront cost, with no consideration given to labour saving, which we all know is the biggest cost factor.

The supplier executive advised that this pattern of purchasing is typical of many contractors but qualified the statement. "The big three are getting better, but most are still doing the same old tricks," he added. "Under pricing to get the contract and then cutting the cost of machines and supplies to try and make it viable. when it doesn't work out, they try and blame us."

The chemical supplier - 'The level of analysis is very low'

According to a major chemical supplier, cleaning contractors' perceptions of value are fundamentally driven by the price/quality equation (p=QxP). Each purchaser makes his or her decisions on value, depending on their individual weighting of each of these components. The problem, he explained, is that they generally fall apart when things go wrong. "The level of analysis of problems is very shallow and contractors tend to blame the product rather than looking closely at cause, effect and solutions."

The chemical company executive cited green cleaning products as a good example. He believes that the market has gotten to a point where the science promoted by manufacturers and suppliers is total rubbish and demand is customer driven, rather than contractor driven. Most contractors just don't understand it and are generally not interested in being green, rather they want to create a perception of being green to their customers. They buy chemicals that appear to be green through marketing and branding and functional factors such as colour, smell, thickness rather than analysing what the product can actually deliver technically and in sustainable outcomes.

Accessory equipment: 'How much is it, rather than how much will it save me?'

"The principle is terribly simple," explains one major supplier of cleaning accessories. "Contractors costs are 90% labour and 10% for everything else. Yet they will argue the price with suppliers on something that represents less than 0.03% of their costs, rather than looking at the outcomes which might mean a 5 to 10% saving on labour."

Using a stripping pad as an example, he pointed out that his sales on standard black pads were more than twice the level of a new hi-productivity pad. The black pad sells for $10 while the newer technology pad sold for $20. Contractors are buying the standard black pad simply because it was cheaper. However, the extra $10 invested in the newer pad would reduce labour costs by around 30%, while the pad would probably last twice as long as a traditional pad. This janitorial supplier executive estimated the return in labour savings and productivity would be $67 for the $20 invested over traditional stripping pads.

The consultant: 'We live in their world - That's life. Adapt or go elsewhere'

"Turn the question around and ask why can't suppliers adapt to the changing business of contract cleaning," says a leading industry consultant. "Go and look at your market properly and ask your self 'What are the issues?' and reconsider where you stand as a supplier."

His point is that pricing is at an all time low but many contractors are making more money than ever through illegal subcontracting and cutting corners. There is less quality cleaning being done, so there is less demand for chemicals and equipment.

"Suppliers complain that their product can save a lot of labour, but many contractors, including the big companies, always buy the cheapest. Why? Because $100,000 saved in supplies is a lot of money whichever way you look at it." This consultant cited the case of a major contractor who supplied only the cheapest detergent available to their site. Suppliers kept explaining that their product was less cost per dose, cleaned better and so on.

From the contractor's viewpoint, he knew the product they were using could be better but when you had 500 sites with a set allowance of chemical per site per month and the lower price product did the job, he knew his costs and maintained consistency. The cost of change, even to a better product, according to the consultant, would far outweigh the money saved in labour and dosage because the change management requirements including retraining staff, safety system changes and re-jigging or changing dispensers.

His advice to suppliers is, "Keep on griping and you will lose business. Adjust to change and understand your customers and understand their business. Above all, build and maintain strong relationships and look at innovation in programs that will provide them fixed material costs."

Do they have a point, or are they missing the point? We leave it to the reader to decide.

www.janitech.com.au

* Brian Clark is the principal of industry consultant Janitech

Suppliers need to adapt to contractors' world