Date:         Wed, 4 Sep 2002 18:13:15 -0400
Reply-To:     The Bus Depot <vanagon@BUSDEPOT.COM>
Sender:       Vanagon Mailing List <vanagon@gerry.vanagon.com>
From:         The Bus Depot <vanagon@BUSDEPOT.COM>
Subject:      Re: VW obscene parts pricing
In-Reply-To:  <F130tCmsiMEtOnmSoLf0002e936@hotmail.com>
Content-Type: text/plain; charset="iso-8859-1"

> Once the manufacturer received our order someone had to print
> labels then go to pick the parts. He or she would count out the seal rings
one,
> two, three, four,... and put them into a plastic bag. The plastic bag
would then be
> labeled and sealed and put with the rest of our order. At packing time
> someone had to make sure that all of our little bags and boxes of
> stuff were there. Our order than had to be shipped to us (another
expense). When that
> order arrived, all of the parts would be checked into inventory on the
computer
>(after we counted them) and put into their bins on the parts shelf.
> Finally, a counter person would have to look up a part number,
> retrieve the part and print a customer receipt when someone purchased a
seal ring.
>
> Now how can you do that for $0.32?



This is pretty much what any parts supplier has to do when processing small
orders. Frankly, we lose money on almost any order under $10.   It takes
roughly the same amount of time to process a $1 order as it does to process
a $100 order.  Many factors (such as the time involved in picking the order,
packing it, charging the credit card, printing the invoice, making the UPS
label, etc.) take the same amount of time no matter how big the order is.
But on the $1 order we only made about a quarter to begin with.  That
doesn't even pay the wages of the guy who put the part in a box and taped it
shut, much less all of the other expenses involved in processing the order.
(Of course, with any luck, the guy who places that $1 order today will place
a $100 order tomorrow, so it all evens out in the long run.)

The dealer, however, has to deal with this same issue much more than we do.
As an aftermarket supplier, at least we can get away with "cherry picking"
only the 500 or so more commonly needed little $0.32 parts on the car.  As
for the other 10,000 little obscure parts that only get ordered once a year
or so, we refer the customer to - guess who - the dealer!  So while 500 of
these little parts are our problem, about 10,000 more are his problem.  This
is one of the reasons that "dealer" prices are so high on the bigger items -
part of the cost of procuring, inventorying, and supplying 10,000 little
nuisance parts is built into the price of each of the bigger parts.

Of course, the auto manufacturer isn't doing this solely out of the goodness
of his heart. Unlike the aftermarket parts supplier, his primary business is
selling new cars; the parts are secondary. And if he is going to sell new
cars, he must make replacement parts for them.  It's a necessary cost of
doing business, and must be considered in conjunction with the money he made
selling the cars in the first place.

- Ron Salmon
  The Bus Depot, Inc.
  (215) 234-VWVW
  www.busdepot.com

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