Purchasing Politics

By Lloyd Graff

On Thursday, I had the opportunity to spend several hours with Mitch Liss of Edsal Manufacturing, a major producer of steel shelving and office furniture with sales of $200 million, based in Chicago. Mitch gave Noah and I an insider’s view of purchasing politics by big box retailers and huge catalog sellers.

He said that within massive organizations like Wal-Mart or Grainger you find two distinct parties influencing purchasing decisions, the buyers and the global (strategic) sourcing groups.

The shelving buyers who work closely with the sourcing people have the responsibility of making the final call about what product makes it to the sales floor or catalog and how much is ordered. The sourcing guys are charged with scouring the world to find cheaper shelves. Their salary and bonuses are dependent on increasing the amount of dollars sourced, primarily from China.

The purchasing guys have little interest in where the product ultimately comes from, as long as it sells well. This drives a guy like Mitch Liss crazy because every rack and shelf he makes is a sitting target for the strategic sourcing dudes.

What bugs Liss is that the incentives are rigged to favor foreign placement of orders even though he usually offers an equal or lower final price to the reseller.

His biggest irritation is with Costco, who he’s been trying to sell to for eight years without success. He says he can sell a better product for less money than the Chinese currently supply, but the buyers refuse to allow him to be seriously considered head to head against the competition. Evidently, for the Costco buyers, the idea that an American firm based in Chicago can undersell the Chinese is so ridiculous that Edsal cannot even demonstrate its products side by side at Costco headquarters in Washington state. Interesting how Costco has remained blind to the fact that Edsal sells millions of dollars of products to Home Depot, Lowe’s, Menard’s, Grainger and McMaster-Carr.

I would think that an American company would at least get a fair look by a firm that sells most of its goods in this country.

Question: Do you think there should be an inspection fee or tax on every shipping container that arrives in the U.S.?

Mitchell Liss of Edsal

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5 thoughts on “Purchasing Politics

  1. AvatarGopal

    I don’t think any non tariff barriers will solve the problem. I believe that the market is the ultimate decision maker. If Edsal makes world class product with world class prices, its products will sell on their own. Edsal’s success with other retailers should be an automatic endorsement of its techno-commercial prowess. I would suggest that Edsal run a co-promotion with its channel partners and generate ‘pull’ for its products- no one can keep a good thing down, once the secret is out

     
  2. AvatarRichard Rudy

    I thought it was interesting that your post concluded with a suggestion that a government-imposed tax or fee on imports was (again) the cure for pin-headed buyers who happen to be currently buying from China.

    I agree that the playing field should certainly be level, and in important ways it’s the government’s job to do that, if it can. I also agree that as Americans, we should give every fair chance for American companies to compete for our business. But I have to ask: why would a company deliberately create a buying system that favors imports despite an equal or lower final price from domestic suppliers, not to mention a superior product? I suspect the qualifier “final” is involved. Perhaps Costco doesn’t understand or attach enough significance to the difference between price and total cost.

    But if they don’t, adding a dead tax onto imports won’t solve the problem: Americans bitch about “exporting jobs” from one side of their mouth, and clamor for the absolute lowest price for everything they buy out of the other side.

     
  3. AvatarJim

    It should be based on the fact if any particular country ‘hits’ U.S. made goods with a tariff we should reciprocate in kind. Other countries protect their industries by slapping excessive tariffs on foreign goods, we should help U.S. companies and place tariffs on imports that come from that particular country at the same rate they tack on imports to their country.
    While some American consumers want only the lowest price, other factors like quality and country of origin do matter. I pay more for Sunoco fuel and argue with coworkers who buy Citgo gas. I wish the typical American would recognize where other items we buy come from as well. Supporting countries and those leaders who despise our way of life to save a few bucks here and there is not very wise for our long term success as a nation.
    More than ever the USA needs to take measures to stay competitive and offer vast opportunities for our young people. If tariffs are a way to help our country compete globally then I would say yes

     
  4. AvatarGeno DeVandry

    I believe if we want to level the playing field with imports, we need to get rid of our current tax system. I believe we should get rid of all taxes except one. We should go to consumer tax only and have the imports share the burden.

     
  5. Avatarneil westervelt

    I think we should treat every country the way they treat us in regard to imports. I appears to me we are the only ones doing free trade. I live in a small town in Kansas with two major employers, one just announced they are closing their plant and moving to Mexico, I wonder where they plan to sell their products? I bet it isn’t Mexico.

     

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