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TSI Solves the High Cost of the Low Cost Bidder
The Company
Headquartered in Newport News, Virgina, Sweeny Fixtures is a leading provider of fixtures to retail chains throughout the United States. Their customers include rapidly expanding "big box" retailers such as the home improvement chain Lowes. Customers such as Lowes represent a large portion of Sweeny's customer base. They are typically very demanding and have little tolerance for missed deadlines. To remain competitive Sweeny has to get the finished fixtures in the proper sizes to its customers on time.
The Business Problem
Due to store opening schedules Sweeny Fixtures has to meet a very strict delivery schedule. In addition material must be suitable for use in a retail store setting. If a vendor is unable to make a scheduled delivery, or respond to an unscheduled delivery, purchasing agents must scramble to find inventory at a back-up supplier and pay a higher price so as not to miss their delivery date to their customer. In addition, rusted material is unusable and must be replaced, frequently at a higher cost.
Sweeny Fixtures selected its primary supplier based on price alone. Due to poor notification systems from the supplier, Sweeny's purchasing agent was required to follow up to check on timely delivery. When the supplier was unable to make timely delivery, the purchasing agent called Tubular Steel because they knew that Tubular always carried sufficient inventory. However, the "emergency fill-in" price was higher than that of Sweeny's lead supplier.
On occasion material also arrived at Sweeny rusted and unsuitable for use in retail store fixturing. In these cases as well the purchasing agent was required to contact Tubular for emergency fill-in goods.
How could Sweeny Fixtures receive goods at the lowest price and also receive assurance of the timely delivery of quality material?
The Solution
TSI and Sweeny Fixtures' purchasing agent calculated the actual "delivered" (not quoted) costs of the mechanical tubing used in Sweeny's manufactured fixtures. These costs are shown in the table below.
TSI then calculated a "blanket" contract rate for Sweeny that would meet or beat the effective costs, but insure on-time delivery of quality material.
Purchasing History (2000)
Primary Vendor
Emergency Fill
Effective Cost
TSI Cost
Material
Quant
Cost
Quant
Cost
Quant
Cost
Quant
Cost
REW 1.0x.065
30,000
$0.30
6,906
$0.38
36,906
$0.32
36,906
$0.31
SQ 1.5x1.5x.065
900
0.53
300
0.61
1,200
0.55
1,200
0.55
REC 3.0x1.5x.083
2,500
0.90
798
0.99
3,298
0.93
3,298
0.92
REC 4.0x3.0x.188
120
3.16
44
3.48
164
3.25
164
3.24

The Result
Sweeny Fixtures found that they didn't have to pay extra for quality and service! In addition to these tangible benefits that Sweeny received, TSI routinely works and interacts with their purchasing agent and TSI's product managers to insure that, as Sweeny's demand increases to meet the expansion needs of its customers, TSI maintains sufficient inventory levels. Twice a week, shipments arrive on flat bed trucks, speeding up the processing of material. Overall material inventory levels at Sweeny have been reduced due to TSI's delivery reliability.
Customer Comments
"Tubular Steel has eliminated my biggest source of frustration and concern," says Gary Carter, purchasing agent at Sweeny Fixtures. "They haven't missed a single shipment all year and every shipment has met the quality standard that we require. In addition, when one of our customers creates a fire drill for us, I have always been able to reach my TSI Account Manager on her direct "800" number."
[Note: While an actual example, names and prices were modified to maintain confidentiality.]
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