Dan Majeres, Rainbow Procurement Officer
Today we live in a “just-in-time” world, where many tree care and landscape companies buy their products and equipment as needed. It’s a model that has worked, however, as labor and business costs go up it becomes even more important to look at ways to save money. The “just-in-time” model adds costs throughout the supply chain for the end-user (you), the supplier, and the manufacturer. Early Order Programs (EOPs) are designed to bring these added costs down in order to save you money.
Early Order Programs Increase Your Buying Power
Instead of the “just-in-time” model of buying a few products here and there throughout the year, Early Order Programs (EOPs) are designed to pull all the products you were going to buy into 1 – 2 large order(s). This increases your total buying power and in turn, you’re able to get better prices and more favorable payment terms.
With your savings, you can use them for other areas of your business, such as payroll, operational expenses and reinvestment purchases needed for next year. For seasonal companies, it allows more flexibility with cash flows because payment due dates are extended. It also ensures that you have what you need when you need it.
Early Order Programs Benefit Buyers, Suppliers, And Manufacturers
Buyers are able to get better pricing and payment terms because suppliers are able to secure better prices and terms from manufacturers. Manufacturers can do this because they are able to secure better prices and terms on raw materials and ingredients. By buying in larger volumes, buyers, suppliers, and manufacturers can reduce their unit prices all the way up the supply chain.
How Does An EOP Work?
This happens because all the fixed costs, which are the costs that a manufacturer incurs whether they are producing 1 unit or 100 units, are spread out across more units. Assume that the fixed cost is $10. To produce 1 unit, the fixed cost per unit is $10, but if a manufacturer produced 100 units the fixed cost per unit would be $.10. The greater the volume the smaller the fixed costs per unit become. These savings are then passed onto the supplier, which passes them on to the end-user.
Is An EOP For Me?
An EOP is not meant for all companies. The companies that get the most value out of EOPs are the ones who are able to pull their total purchases for the following year into 1 – 2 larger order(s). However, because of extended payment terms, even smaller companies can often take advantage of EOPs, without having to worry about paying everything all at once or in the short term.
In summary, the more you’re able to commit to your future, the more you’ll be in control of your product needs and lowering your prices. The more you rely on the “just-in-time” model, the more likely there could be breakdowns in securing materials and more likely you’ll be paying more with less desirable payment terms. By utilizing an EOP, you can save on what you’re already going to be buying and get better payment terms.
Five Reasons To Buy On An Early Order Program
- Lock in the best prices on the products you use most
- Ensure you have the products you need for next spring
- Defer payments for better cash flow management
- Free up time in your busy spring season planning
- Help us know what you need; we use that to negotiate better prices for you!
About The Author
Dan Majeres is the Procurement Officer with Rainbow Treecare Scientific Advancements. He manages the Rainbow supply chain with our raw material vendors and manufacturing partners. Dan works on getting you the best prices on materials and discovering new tools that can help you grow your business. Have questions for Dan? Email him at email@example.com