At a recent consultation for a prospective client I took notice of an item that was identified as “documented savings”. The item was a film for vertical baggers. This company used approximately 10,000 pounds per month. I asked for a sample of the film and obtained the spec’s and purchasing history from their system. I was immediately able to show my client where their buyer has lost the company at a minimum $120,000, however it was recognized by the company as a $60,000.00 savings. It could be happening at your company and you would never know either.
First the data: The purchasing notes in the company’s system showed the film spec at a thickness of 2mil. The notes also showed the past vendors price of $3.00 per pound and the new vendors price of $2.50 per pound. A $0.50 per pound reduction is indeed significant over a year. Unfortunately the much too often mistake of buying on price ended up costing the company almost 3 times of what they thought was saved. How? No one at the company measured the films mil thickness when it arrived; the film received measured out as 3mil. A practice some film companies use to overcome price objections. When presented with this discrepancy my clients response was: “We paid for a thin film and received a thicker and better film for the same price? What’s the problem?”
Here’s the problem: For every 1,000 pounds of 3mil film they were yielding 22,000 lineal feet less than if it were the 2mil film. Over the course of a year that is 2.6 million feet of film, or 58,000 pounds. At $2.50 per pound, this purchasing error just cost my client $120,000 in the past year! This doesn’t even include incorrect production waste factors and miscalculated commission payments on cost of goods sold.
Company’s like mine save manufacturers, processors, and copackers money. Our knowledge of materials, manufacturing, and industry practices benefit our clients. We consult, procure, manage, and distribute packaging materials to our customers on time and at reasonable costs. Everyone from our front office to our dock door are continuously educated on all materials that flow through our facility. Our first consultation is free, however your company may walk away with money like the example above; and yes they signed a contract within two weeks.
Don’t be Penny Wise and Pound Foolish. Allow my company to procure your packaging materials and your company can focus on producing and selling quality product.
Thanks for reading.
Vice President of Sales
Pioneer Packaging Chicago
Consulting Procurement Distribution