Get with the program

November 6, 2014 -  By

Turf and ornamental care professionals share their thoughts on the pros and cons of participating in early order programs offered by chemical and fertilizer manufacturers and distributors.

If it’s true the early bird gets the worm, maybe the turf and ornamental care manufacturers and distributors are on to something with their early order programs. These buying plans, which commonly require companies to commit to purchasing a certain amount of pesticide and/or fertilizer products by mid-December for next year, may offer an array of discounts and other perks.

While the opportunities make sense for some operators, others say they’re risky and forgo participating. Here, we take a look at the pros and cons.

On the upside

For many, the financial discount is the main reason for participating in these programs.

Other perks—such as meals, golf or trips—can be a nice add-on but are rarely a cited reason to participate. Keith Bowman, maintenance division manager at McHale Landscape Design, a 100-percent residential company in Upper Marlboro, Md., that does $20 million in revenue, says those offers may “sweeten the deal,” but he’d never be swayed by a golf outing or a trip. “We participate in early order programs simply based on the dollars saved,” Bowman says. “I’ve worked hard to build relationships with vendors I trust and a golf outing is not going to sway me a different direction.”

[  Related Links: Do your homework on early order programs  |   Early order program survey  ]

Dan Gordon, a CPA with Turf Books in Newton, N.J., tells his green industry clients to take part in early order programs if they can get a good discount and they’ve thought through their cash situation carefully. “The real challenge is you’re going through the worst part of the year, cash-flow wise, so you can get yourself into a situation where you could deplete your cash until you start up again in the spring,” he says. “There’s a bit of an analysis you have to do.”

First, determine how much cash it will take you to get through the off season and what you’ll do if you hit a shortfall. “If you don’t have the money, can you borrow the money and is the spread such that you’re ahead?” Gordon says. “From there, it’s really, what’s the best deal can you get?”

ryan_masonRyan Mason, operations manager for Tomlinson Bomberger in Lancaster, Pa., a company that brings in $10 million in revenue, agrees that the discount is the biggest benefit. It can really add up if you’re purchasing a large volume, he says. While getting the best pricing is important, Mason says having “distributors coming out of the woodwork” has been good from an education standpoint.

“Usually we work with a few vendors, but all of the sudden when early order season comes around, they all pop up and want a piece of the pie,” Mason says. “It gives me a chance to not only learn more about all the products out there but also learn about the processes.”

Jeffrey Johns, president and CEO of Coastal Greenery in Bunswick, Ga., says his discounts have been a few percentages and they add up. The terms also have been favorable, sometimes affording him the opportunity to not pay for 90 days to 120-days out, interest free, depending on the minimum quantity purchased.

william_iddings“We’re going to be buying these products anyway, so it makes sense to buy them in advance and get the discount,” adds William Iddings, co-owner of Advantage Green Lawn & Pest Solutions in Summerfield, Fla., a 10-person company with more than $1 million in revenue. “It’s also nice to have plenty of product sitting there, ready to go. We find it helps us to be better organized.”

Mason calls it “being prepared.” Using the early order programs and stocking up on chemical products in advance has forced the company to put together advanced plans and projectsions for the year ahead. “It’s nice to have that focused plan instead of making a last-minute decision,” he adds.

Looking down

Advanced planning and easy access to supply are two pros that also pose concerns. While Mason says being prepared is a big plus, committing to a program so early also may be viewed as a downside. “It depends how you look at it,” he says. “It’s nice to plan ahead but you also have to realize when you’re committed to a program, it doesn’t allow you to make some of those tailored changes. You also have to be good at forecasting quantities ahead of time based on historic sales. That’s not always easy to do.”

Storage also is a concern, adds Johns. If the manufacturer requires you to accept the full amount of pre-purchased product, it can take up valuable storage space. Plus, companies need to factor in potential hazards.

“One of our core values here is safety, so having guys working around product that’s just sitting in storage is an issue,” Johns says. “Being exposed to chemicals or even just having it block walkways while in storage are two issues we worry about.”

In some situations, the storage downside can be resolved. Bowman has worked out an arrangement with his vendor where he participates in the early order program but the vendor delivers him product as needed. Otherwise, storage would be an issue not only because of space, but because of theft. “When you have a lot of product sitting around, it increases your chance of theft,” Bowman says. “We simply can’t have product disappearing.”

john_prusaConcerns like this have been enough for some firms to opt out of early order programs. John Prusa, president of Highpoint Lawn Service with six locations in Ohio and New York, says early order programs made sense to him as a smaller company since it allowed him to obtain better pricing and develop relationships with vendors. But as the company grew, the downsides began to tip the balance.

“The benefits of saving a small percentage off do not overcome the negatives,” Prusa says. “By locking in purchases early, we create the associated lack of active market flexibility of choice. Additionally, we see inventory damage and loss while loading up our warehouses with truckloads of product. Plus, we tie up cash.”

Today, Prusa says he works hard at maintaining good relationships with his vendors but does not participate in early order programs.

“I prefer to maintain market, product and delivery timing flexibility in purchasing and to maximize cash retention,” he says. “In other words, having the ability to obtain freshly produced product in a just-in-time manner while still maximizing cash retention is the name of the game.”

Relationships rule

The vendor/client relationship is really what it’s all about, Prusa says. “Our goal is to always pay on time or early, and by treating our vendors properly and being a valuable client, we gain the benefit of favorable pricing and service,” he adds. “We try to treat our vendors as we would like to be treated by our customers.”

Other landscape business owners find early order programs to be a “game.” Larry Ryan, president of Ryan Lawn & Tree, a 27-year old, employee-owned company based in Overland Park, Kan., is one of them.

“If we’re a good, loyal customer we want the best price regardless,” Ryan says. “I don’t want to feel like we’re being manipulated or have to jump through hoops to get the best price. I want my price based on the quality of customer that I am. I always pay my bills promptly and that should count for more than how much product I am willing to buy in advance.”

larry_ryanRyan says while he’s open to sitting down with vendors and discussing products and programs, he tries to avoid getting locked into anything that wouldn’t allow him to customize his program and change product on the spot. He’s also found he gets similar pricing to “early order” in the spring.

“Everyone wants to sell in the spring and you can get a similar price simply because the vendors want to stay competitive,” Ryan says. “My advice is to not get too caught up in early ordering.”

Those who do order early say anything that helps them remain competitive in a low-margin market is a plus. Mason’s best advice is to do the research and seek out the best terms. Calculate the rebates based on volume and which products fit best into your program. He adds: “If you’re going to commit yourself to a program, make sure it’s the right one.”

Casey Payton

About the Author:

Payton is a freelance writer with eight years of experience writing about the landscape industry.

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