My customer was completely accurate that I HAD quoted him $70 on the part.  Unfortunately it had been via email 8 months earlier.  And therein lies the issue.....

There is NO guarantee on price stability of New Old Stock parts

In our real world example above we had stock in July 2014 and quoted $70.  Stock went to zero and we received replacements in January.  When the replacements arrived we re-priced the items based upon our new cost.  Historically, that $70 price had not changed in 7 years within our system.  However, with no warning, we updated our price to reflect the new purchase price. 

NOS/Surplus Parts fluctuate in price based upon supply and inventory level.

The higher the inventory level, the lower the price.  Take a look at Unimog 404 Steering boxes.  Current Price is $242 for a complete NOS steering box and column.  Pretty good price if you ask me.  This price has been consistent within 10% since 2002.  Pretty simple, we have hundreds of boxes in inventory.  As that inventory goes down to say 100 boxes, expect a price increase.  At 50 boxes, expect an additional price increase.  At 10 boxes you will not even recognize the $242 price!

So what impacts the above pricing?

Sources, Competition, Foreign Currency, Reproduction Costs, Overhead, and Warehousing Costs all go into the pricing equation.  I'll break some of these out for you.

Sources - If we can find the parts overseas and at good prices we purchase them.  Since 2001 when we really made the decision to move into spare parts we have purchased approximately 10 Million USD in spares.  Sources vary but have included private companies, Swiss Military, Mexican Military (yes they had 404's), German military, Belgian Military, French Military and numerous other sources including Mercedes Benz, Steyr Puch, and the OEM Manufacturers.  Our goal is to provide a quality part, in a timely fashion, while making a legitimate profit.

Competition - Yes, our goal is to be price competitive.  In general we will price match any competitors pricing on like products.  This requires us to keep good relationships with those competitors as there are times where I simply cannot compete with a deal that they are offering.  In those cases, we may buy the item directly from the competitor, and or advise you that we can't compete with what they are offering.  Please note, we inventory thousands of part numbers.  It is not possible for us to know where our competition is on price for every item.  We do not take it personally if you let us know we are not competitive on a part.  In fact we appreciate it and more than likely will make a price adjustment to keep your business.

Currency Exchange - This is HUGE.  In the last 6 months we have seen a major devaluation of the Euro.  This is good when we are buying.  However, it's a double edged sword as we recently had to reprice $500,000 in inventory that was purchased at a 1.38 exchange rate.  When the exchange rate drops to 1.06 the real world loss in value of that inventory was approximately 125K.  Ouch.  In addition it should be noted that when you carry a large inventory, it takes time for that inventory to reflect new pricing.  In general, items are not re-priced until they are being purchased at the new price.  If we are carrying 8 months of inventory of an item, that repricing will probably lag behind exchange rates by 8-10 months.

Reproduction costs - When I look at a part that I know could be reproduced for pennies on the dollar, we seriously look at that option.  The issue is small batch reproduction costs, and demand.  If the historical demand is 10 pieces a year on an item, and minimum reproduction is 500 doesn't make sense to reproduce.  As more and more of the spare parts are obsoleted, and the availability of NOS dry's up, this will become more and more of an issue.  Behind the scenes we have conversations with other dealers on specific items and in general our goal is to keep your trucks running.  I think that the 404 customer base has been a bit spoiled with the cold war era NOS parts stocks being so readily available.  That supply is not going to last forever.......

The final piece of the pricing equation is overhead and warehousing.  Our overhead directly impacts your pricing.  I'd be happy to have a phone bank of customer service agents picking up the phone at the first ring.  Are you willing to pay for it?  Add in the fact that a good portion of our calls require technical assistance, and the waters get even muddier.  We at EI are lean when it comes to staffing.  We watch our overhead.  That is not to say we are going to skimp either as evidenced by the purchase and renovation of our new facility.  We are pleased to operate from one of the largest and most well organized Unimog facilities in North America.  But, when we ask you to place your orders online, use the ticket system, and to be patient, it is a direct reflection on the pricing you are going to pay.  We are the quintessential "Mom and Pop."  We have a passion for what we do and appreciate our customers.  Personally I think there is a pretty good case to keep it as it is, as history has proven to Mercedes Benz time and again, the market in North America is not going to support a giant Unimog organization.

Food for thought.........  Scott Ingham
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