Buying Refractories the Smart Way
What’s the most cost-effective method for buying refractory materials for most OEM and end user customers?
- Buying refractory products direct from the manufacturer
- Buying refractory products from a distributor
Full disclosure: F.S. Sperry is a refractory distributor in addition to being a refractory contractor. Many of our OEM and end user customers buy refractory materials from us without needing any further service. And most have found that buying from us actually makes more economic sense than buying direct from the manufacturer.
That’s contrary to what many believe: that buying direct from the manufacturer assures them the lowest price.
Total Cost Is What Matters, Not Individual Unit Prices
There are two instances when buying direct from the manufacturer is typically going to cost less than buying from a distributor:
- If you’re purchasing a very high volume of refractory materials
- If you only need the specific refractory materials made by the manufacturer
However, the biggest difference between a manufacturer and a distributor like F.S. Sperry is this:
Unlike a single manufacturer, F.S. Sperry can procure the entire bill of material, including logistics. Most manufacturers can’t quote for what they don’t make.
Our volume buying power gives us leverage in our relationships with manufacturers, allowing us to offer the same cost or less on the entire bill of material as any single manufacturer.
Don’t Forget the Time Needed for Research…
In addition to the out-the-door total cost, most corporate purchasing departments in smaller companies simply don’t have the resources to complete the due diligence for the entire list of products that make up a bill of material.
So, when you factor in people’s time and the possibility of only buying the products you need in the quantities you need them, our customers find that it makes more sense to sole-source the procuring of refractory materials from F.S. Sperry.
… And the Freight Required to Receive the Bulk Discounts (and Waste)
In addition, even though you may get a competitive price from an individual manufacturer, when you factor in the freight cost, the quantities you have to buy to get the discounts, and the waste on the overall product (the overages), you rarely save any money.
Your total delivered cost is often less when you go with F.S. Sperry.
A Real Life Example
Sometimes it helps to take a look at an example. Here’s what happened to one person who recently requested a quote:
- Many of the companies he went to “no quoted” the items they did not make (meaning they didn’t provide a price).
- He spent a lot of his time going back-and-forth and qualifying his RFQ.
- He did not take into account the freight cost to ship individual items.
- We asked him to allow us quote the entire BOM, including freight. It turned out that our delivered price was lower, when he took into account that he bought what he needed and let us handle logistics.
- Although he obtained good prices, for example on the brick, some manufacturers would not cut the bricks that were “non-standard” or would only do so at an additional upcharge that negated the savings he thought he would get.
- He obtained a better price (per foot) for the PTFE than our price; however, his overall cost was more since he had to purchase full quantities as manufactured. When he factored in the waste (material he didn’t need), our overall price was lower, since we were able to supply in the quantity he needed.
- He gave such a generic description for his castable that the prices were all over the map. He was not in a position to evaluate what was quoted. We were able to dial this in for him.
Overall, he admitted after it was over that, when he factored in his time, freight and the overall cost difference, the savings for going “direct” just did not materialize.