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Make no bones about it, the provision of free on loan equipment can be an expensive business if not managed properly. Chemical suppliers (distributors and manufacturers) can get badly burned financially if they get their account viability equation wrong.


The assessment as to whether a dosing system installation is suitable or commercially viable needs to be well thought through, otherwise the customer may be receiving a Rolls Royce system when a Mini Cooper one may fit the bill better.


“The assessment as to


whether a dosing system installation is suitable or commercially viable


needs to be well thought through, otherwise the customer may be


receiving a Rolls Royce system when a Mini


Cooper one may fit the bill better.”


There is a graveyard of suppliers who have tried to be just a little too smart by offering dirt cheap concentrates and expensive dosing equipment (which needs to be fitted by qualified professional technicians) only to find that the investment they have made in capital equipment and engineering costs has taken a significant chunk out of the available profit and has rendered the potentially profitable account into a break-even one at best.


In certain quarters of the cleaning industry there is a difference of opinion about the relative price charged for chemical products suitable for controlled dilution and the actual cost-in-use. The reputable suppliers’ chemical price quite simply should support the cost of the associated


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equipment and engineering support, and yield a reasonable profit, whilst delivering savings to the client. Getting the balance of this equation right is not as simple as many people think, and can be financially disastrous through inexperienced assessment or a blind commitment to give the customer whatever they want – at any cost.


It is important to remember that the cost of the initial investment and the associated costs of maintaining chemical dispensing equipment in good working order throughout the duration of a supply contract remains the responsibility of the chemical supplier, not the distributor or the customer. As such, the equipment remains the property of the supplier at all times.


This title of ownership of dispensers can sometimes become a hot topic when customers or distributors misguidedly believe that a combination of making profit on product sales and the writing off of the equipment over a period of time in some way magically transfers the ownership to them. At no stage is there any legal transfer of ownership. Free-on-loan means exactly what it says, and by lending the equipment, the supplier always retains ownership no matter how long the equipment has been in-situ, unless there is a written agreement whereby the supplier confirms the sale/transfer of the equipment.


Can you remember the conversation Trigger had with Del Boy and the boys in the local pub in a classic ‘Only Fools & Horses’ episode where he declared to Del that he had used the same broom for 15 years? It was only when he mused that he had gone through 14 broom handles and 17 brush heads over that period that he had in fact had 15 brushes, not one.


Over the period of a contract, dosing equipment can be viewed in exactly the same way. It may be perceived as the same original piece of kit and perceived as old with little or no value, but over the years it will have had many pump heads, tubing or component replacements to keep it in working order – as such, the equipment always maintains a real


value. Whether it is one year old or ten years old, as long as it is in working order and is fit for purpose it still has a meaningful value, and is still provided free-on-loan from the owner.


For any supplier, return on investment is the key consideration – there seems little point in installing expensive dosing equipment on a free-on-loan basis, if the chemical product is being sold at a nominal commodity price to the end-user. It is not because manufacturers are greedy or trying to pull the wool over unsuspecting customers eyes, it is simple maths.


A genuine concentrated product sold at £12.50 per litre which dilutes to 100:1 equates to just over 6p per 500ml of ready to use solution. The misconception regarding the definition of PRICE and COST allows some chemical suppliers to try and talk about these two in the same breath and to offer a mythical double benefit of cheap concentrates at lowest in-use costs.


If the same concentrate was sold at £2.50 per litre, (1.25p per 500ml bottle of ready to use), how does this work as a commercial model bearing in mind there are 50x500ml bottles available from that litre of concentrate? The customer basically gets free chemical and the supplier gets no repeat sales whilst funding the provision, the installation and maintenance of the dosing equipment – no wonder some companies get cold feet.


Some notable chemical suppliers have moved away from chemical concentrates because they don’t see regular repeat purchases. Likewise, their sales people don’t like selling them because they don’t get regular orders and in their minds are missing out on sales commission. It does make you wonder just how many products are being sold by these suppliers on a daily basis and then being wasted through lack of controlled dilution.


To read more of Max’s musings, visit the Arpal Group blog here.


www.rpadam.co.uk www.arpalgulf.com


Tomorrow’s Cleaning August 2016 | 27


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