The lowest price usually wins, but what happens when projects take an inordinate amount of time to get off the drawing board and into action? Here’s how electrical distributors can effectively cover the spread.
The adrenaline starts pumping as soon as the call or email comes in, asking the electrical distributor to bid on a lighting package for a substantial construction project. The wheels go into motion immediately as the distributor scrambles to pull together a competitive bid. It all pays off when the distributor gets the green light—the submitted bid has not only passed muster, but it has also won out over the other three distributors in the area. A few fist bumps and celebratory hoots later, the electrical distributor refocuses on the next task at hand.
Then the waiting game starts and continues for weeks or even months as the electrical contractor gets all of its ducks in a row and then waits for its own start date to arrive. A lot of things can happen during that waiting period. Lighting prices may fluctuate. Specified products may become difficult to source (or even become obsolete, depending on how much time passes). Suppliers may even stop making the items in question.
As the ultimate middleman in this situation, it’s up to the electrical distributor to make everything right once the project starts rolling again—a mission that’s not always easy to accomplish in an industry where lighting technology, prices, availability, and other variables are literally changing on the dime.
So, what’s a distributor to do? Patricia Adams, a lighting specialist at Grand Island, Neb.-based Kriz-Davis, a division of Border States Electric, says there’s no one-size-fits-all answer to that question. Projects with long timelines, for example, can be particularly challenging. “Especially on DOT projects—where roads and infrastructure had to be built first—we’ve run into situations where it was months before the lighting was actually needed,” says Adams.
In those situations, Adams says Kriz-Davis will often store the products for the contractor (who probably doesn’t have the physical space to stockpile products). The distributor stores the material in containers (or, according to other customer specifications) and then charges for that value-added service. “A lot of times we can store it and protect it for less money than a contractor can go out and rent a storage yard or a building,” says Adams, “but that depends on what the product is.”
Using this approach, a contractor can lock in pricing and then have the materials on hand when it needs them, and even if that time doesn’t come for another 2-3 months. “They pay us to store the goods for them because the suppliers won’t hold the pricing for that long,” says Adams. “It’s getting to be more and more where [manufacturers] want to push the lighting out the door so that they can get paid.”
Paying an electrical distributor to store products in anticipation of a project start date also helps shield against issues like the current international trade wars and the pricing volatility in materials like steel. “We’re starting to see LEDs increase in price,” says Adams, “and I think that’s going to become even more prevalent moving forward.”
Here Today, Gone Tomorrow
If there’s one thing that lighting specialists are used to, it’s bidding on projects and then finding out just a few weeks later that the products specified have been discontinued or are no longer available. Blame the rapid pace of technology for creating this “new reality” in the LED world, where it’s 3500 lumens and 27 watts one day, and then 3900 lumens and 26 watts the next. “Wattage goes up and lumens go down,” says Adams. “In this ever-evolving LED world, it’s literally here today, gone tomorrow.”
To deal with these “hiccups,” Adams says she takes the time to educate the customer and strives to be as transparent as possible when bidding. For example, she makes sure they know that the bid is good for 30 days. As the clock ticks down to the date, she follows up to see whether the contractor got the job, what the start date is, and what else she can do to help.
“It’s about being proactive with the contractor,” says Adams, “and staying on top of them to make sure we can lock in the pricing, get the items ordered, and get those products stored and/or shipped for them.”
It’s All About Partnerships
Whether she’s quoting individual projects or blanket contracts, Debra McCashin asks suppliers for a minimum of six month’s pricing protection (and preferably 12 months), knowing that things can change quickly in the evolving lighting market. Most times, manufacturers not only agree to those terms, but they also work closely with Crescent Electric Supply Co., in East Dubuque, Ill., where McCashin is director of energy solutions, to ensure a successful project outcome.
“Very rarely do we run into a situation where we secure a job where the manufacturer won’t hold our pricing,” says McCashin. “I’ve never had pushback on a quote where the supplier wouldn’t honor it, unless there was some crazy scenario that was communicated upfront that this price could ‘possibly change’ in the near future.”
McCashin says distributors that are grappling with the issue of extended time periods between bidding and project kickoff—and the associated price fluctuations that might come with them—should work to improve communication with their suppliers. Talk to them about the need for 6- to 12-month lock-ins on pricing in today’s construction environment, where projects can take time to actually get rolling.
And don’t forget to discuss upcoming product changes or discontinuations that could impact the project. Then, communicate those time parameters and other information back to the contractor upfront during the bidding process (e.g., “This quote is good for 30-, 60-, or 90-days).
“This is a business that’s all about partnerships, both with suppliers and with their reps,” says McCashin. “Keep this in mind when you’re working on bids, knowing that by offering up an alternative (i.e., an upsell package, a control piece) or other solution, you can bring the manufacturer’s rep into the conversation and help to create a more successful outcome.”
Tagged with best practices, bidding, pricing