Volume 42, Issue 9 - September 2007

the Farnady Files
The Bermuda Triangle
Lost in the Geometry of Business
by Dez Farnady
 
A recent article in this worthy publication reminded me of the infamous triangle between Bermuda and the Florida coast where things often disappear without a trace. No one ever knows what exactly happens; things just vanish. At first glance, it looks like a lot of innocent empty ocean. Only when you are in the middle do you realize that you will have a hard time figuring out where you really are, and by then it may be too late. But there is really no mystery. It is just a tough place to do business with lots of traffic passing through stormy waters. 

Cutting Out the Middleman
It was not boats that were the subject of the article mentioned above, but an unusual triangular way of doing business. It’s about a three-party deal with a manufacturer selling product directly to a developer who then expects the glazing contractor to install it. It is an attempt at skipping the middleman, thereby having fewer people taking a slice of the pie. But, since in this case the man in the middle is not just a broker or re-seller but the installer, sometime you have to put him back into the deal before it’s all over. 

I can understand that the customer wants to save money by buying direct and that all the manufacturer wants is to get the sale. But, the glazier in the middle not only loses the material mark-up when he is told to install only, but he also loses control of the product. Of course, being in the middle in more ways than one, he will end up being expected to deal with both the manufacturer’s and the customer’s problems. Hey, there is a reason why the man in the middle makes money when he assumes the responsibility. 

Buying Direct
In the normal process, material moves from supplier or fabricator to installer to owner. The product and the responsibilities flow in a straight line and thereby remain traceable. If the process is not a straight line, no one ever knows what anybody else is doing. Material delays or defects become the middleman’s problem and the customer at the end of the line holds him responsible for it all, while the manufacturer is going to scream if he does not get paid. 

The small-scale version of this often happens because everybody wants to “buy direct.” They smell the better deal. When the one-time buyer/homeowner is sent to a supply house or fabricator like you and me, the first thing he tells us is that the contractor sent him. Oh, and, by the way, he would like the contractor’s discount because the contractor told him he could get it. Then, if you are dumb enough to agree to sell it to him at all, he will tell you that his contractor will take care of all the particulars. He gives you his name, address and generally what he thinks he wants so you can write up part of an order, but then forgets to tell you who the contractor is. 

A week later someone calls and wants to know if his order is ready. You ask him who he is and he tells you his name is ABC Construction. You say, “That’s nice, but we don’t have an order for ABC Construction.” So, now we go through the ritual of finding out who his customer was and if in fact anything was even ordered. OK, it was the Joneses. Oh, of course. Didn’t the Joneses tell us that ABC would pick up the material? Well, not quite. They said that their contractor would give us the information and then they would pay for it and then the contractor—I suppose that’s you—would pick it up. “Well, then,” the contractor says, “What did they decide to get?” And we say, “Don’t you know?” And then he finally gives us what he thinks are the specifics and thinks he has an order placed, but he says that he better wait because he wants to check with the homeowner just to be sure.

All right, I have had enough of this. 

“Who is paying for this?”

“Well,” the contractor says, “the homeowner is.” 

“Good,” I say, “because you can tell him to come back here and he can tell me what he wants and he can pay for it, pick it up and I don’t care who puts it in—him, his mother, his Uncle Charlie or even you. And you can do your business with him, which, by the way, is none of mine. Or you can tell me what you want, pick it up, pay for it and I don’t care about what your customer wants. That’s between you and him because there are only two parties to this deal, not three. I will only deal with one person—that’s the one who is paying the bill.” 

the author: Dez Farnady serves as the general manger of Royalite Manufacturing Inc., a skylight manufacturer in San Carlos, Calif. His column appears monthly. Mr. Farnady’s opinions are solely his own and not necessarily those of this magazine.


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