Purchasing Q & A | by Tim Heston, Senior Editor 22
Being small and holding sway
A conversation with Vivek Gupta, managing director at Texas ProFab Corp.
Purchasing managers at small shops have a conundrum. They don’t have purchasing power. Small companies
order in increments of thousands, not
millions, of dollars, so if problems
arise, suppliers don’t necessarily go the
Managers at Texas ProFab Corp.
found an elegant solution. The 47-per-
son business has an unusual advantage.
U.K. Gupta started by launching sister
company Image Industries, a finishing
business, with venture capital and
Small Business Administration loans,
working to pay debts off in the early
1980s. Today, neither Image nor Texas
ProFab is leveraged at all. Everything
is paid for, including the company’s
108,000-square-foot building in Carrollton, Texas, just north of Dallas.
With no debt, the company stands out
in a crowd, from a purchasing perspective. How, exactly?
They pay vendors early.
We sat down with Vivek Gupta,
U.K.’s son and managing director of
Texas ProFab, for the details.
The FABRICATOR: Explain your purchasing strategy and how it has fared during the recession.
Gupta: We pay our vendors every
Thursday. Everybody who does business with us knows they’re going to get
paid, and they’re going to get paid
quickly. That gives us more negotiating power and preferential treatment,
especially in this economy.
The goal is that every vendor of
ours gets paid before terms—not 40
days on 30-day terms, not 20 days on
15-day terms. They will get their check
before terms are up. We have no debt,
so holding a certain number of dollars
in a low-interest-bearing operating account for seven or nine more days
doesn’t seem to make much of a difference, but it makes a big difference with
our vendors when they get paid early.
The result is our vendors spend
time selling us products. But, we do negotiate really hard on price, and everybody knows that. They may not get
the best price from us, but they are
going to get paid very quickly. And
they really appreciate that. So, when
I’m able to get a machinist to come
down on price a certain amount, it’s
because he knows it’s guaranteed.
There is not much risk in dealing with
us. It goes straight to the bottom line.
get a quicker
this. For instance, our
plating vendor can give
us a four-hour turn and does so routinely.
This recession has made our strategy even more valuable to our vendors.
When vendors do business with us, a
handshake means a lot more. They
know we always pay early.
The FABRICATOR: How have you
dealt with the commodity price fluctuations
we’ve seen over the past several years?
Gupta: We try to stick to the business of being in sheet metal fabrication, not in material price speculation.
At one time, it seemed the price of aluminum and stainless steel would go up
every few minutes. Now that pricing is
dropping, we’re able to bid more aggressively. The price of aluminum has
almost cut in half from where it was;
the same goes for stainless steel. [Be-cause of the price swings], we quote for
every purchase order, and [bid based on
When vendors do business
with us, a handshake
means a lot more. They
know we always pay early.
the] current material price. And we
make quotes good for only 15 or 30
days. When pricing looks favorable in
our opinion, we do stock significant
amounts of aluminum, stainless steel,
and electrogalvanized steel, though we
try not to make this speculation a
habit. These materials store well with
no risk of corrosion.
On the specialty purchasing side
[for services such as machining and
plating], there is a lot of excess capacity out there, so the pricing is very
competitive. And, again, because we
pay early, we’ve been able to garner a
lot of negotiating power. ■
Texas ProFab Corp., 2151 Hutton Drive,
Carrollton, TX 75006, 972-241-5050,
This is a new column covering the challenges
and strategies of pur chasing managers in
metal f abrication. As alw ays, the editors
welcome feedback. If you have a purchasing story to tell, ideas, or input, feel free to
contact Tim Heston at timh@the fabricator.
com or 770-498-7454.