Validity of vendor quotes. Do not ignore.

When you are going out to vendors for quotes, you have to keep in mind that quotes are good only for so long. How long vendors hold quotes really depends on the product and industry. If you are sourcing cotton sheets, for example, you might find vendors will not hold the cost beyond one month because the cost of cotton in recent years has been volatile. For example from the second to the third week in January 2013, Cotton prices rose sharply on world markets and this of course affects your production in China. On the other hand if you are doing a printed product vendors might hold quotes for up to 6 mos because the price of paper is more stable.

How long vendors hold prices also depends on the margins for the product. For high volume low margin orders, vendors might hold prices for as little as two weeks because the slightest downward move in the price could mean an economic loss. For example, if I wanted to order 500,000 plastic bags at $ 0.10 per piece. If the price of materials went up even $ 0.005 over two weeks, the vendor would stand to lose $ 2500.00. For higher margin products, like furniture, vendors are more inclined to hold prices for longer because they stand to make money even if the price of raw materials increases between the time they quote you and the time you place an order.

Finally, a vendor may honor a quote well after it is out of date simply because they need the business. Similarly, if they have other orders and they do not really need your business then you can expect the quote to go up.

Always ask vendors how long their prices are good and keep this in mind when you plan your production.



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