Integrator vs End User Pricing

I recieved two quotations for a PLC panel build. My cost to buy an L43 processor alone is @3500.00. The two quotes were for @3500.00 total for a small panel with L43, Ethernet card, 32 I, 32 O, managed switch, power supply, etc. My first thought was the quote was completely wrong but two integrators quoted this way. Is it possible that the integrators really get this good of pricing vs. the end user? Or maybe they are asorbing the cost across the scope of the quotation? I just want an honest answer because we have been driving the use of the newest Rockwell automation since the contrologix platform and have been extremely self sufficient and I thought we had a good relationship with out distributor but now I am feeling really taken advantage of...

I would talk to your distributor first because the panel shops may buy a lot more then you do and so they get a better discount. I know our customers can buy parts from us cheaper then they can from the distributor and we still make our profit and they save money.

HTH

It is universal practice in all industries that OEMs (Original Equimpment Manufacturers) get better pricing than end users. In our industry system integrators are treated as OEMs. There are many good reasons for this:

- typically OEMs and system integrators buy higher volume and larger order quantities. This makes the cost of servicing the order lower.
- repetitive business. Most end users order for one project at a time, and then place only small repair orders for years until the next big project comes along
- less technical support is typically required because most OEMs and integrators have more experienced personell than most end users
- additional markup requirements. OEMs and integrators have to add some margin when they resell and still be competitively priced
- Negotiating ability. OEMs and integrators can usually take some time and negotiate pricing, and often have experienced buyers. End users often need it fast, and the engineer or service electrician is doing the buying

As a former employee of an OEM and Systems integrator, i
can tell you that they get a bigger discount then the end user.

As already statrd by Tom, they use more.
the company i used to work for negociated for special pricing and got a good discount on their prices.

regards,
james

When I worked for an OEM, the discounts were amazing, and in some cases, staggering. I won't name the company, but we were paying a 0.21 multiplier on all motors, which was nice.

It's all based on volume. At my last company (manufacturing), our discount was so good that I would purchase all the AB components and have them dropped shipped to an integrator and even a machine builder. Of course it is nice to have an integrator that is willing to work with you on this (not all will). Our annual purchasing of AB components was in the six and seven figures (dollar wise, not quantity).

It is not difficult at all to get into 6 figures when purchasing AB hardware at end user pricing. The other end of this issue is the software. We have purchased a bunch of licenses over the last 10 years. Eventually we had to get into a support contract which is also outragous. Integrators get a deal where if they can sell a given amount of hardware and software they can basically have all the developement software they want for around 10k/year. One fairly complex machine or a small cell can result in a 10000 bill for an end user for software.

By all means, talk to your distributor. Since you are an end user, you get quoted end user prices by default. If you ask for it, and can make a compelling enough case for it, the distributor may be willing to offer a better discount. Consider purchasing some non-AB stuff you're buying elsewhere from your AB distributor as leverage to negotiate your multiplier.

Remember, you're not shackled to any individual salesperson. If you're not happy with the service you're getting, let your salesman know your feelings. If (s)he doesn't respond ask the distributor's management to assign someone different to your account. If you still feel they're not paying enough attention to you, kick the issue upstairs to AB's distributor rep. If all else fails, shop around for a different distributor.

I feel your pain, we have had battles with Rockwell over these issues. We build equipment for our own use, so we are not technically an OEM. Accordingly, I'm sure our volumes are much less than a typical OEM, and we've always paid list prices for AB components. A few years back we embarked on our largest in-house project to date, which was to require $100k+ of Rockwell hardware. At first, our distributor dug his heels in and refused to give us any discount whatsoever. Their excuse was that regardless of how much we buy, we are not an OEM because we are not reselling equipment. Now I don't know where $100k ranks on the OEM scale but I gotta believe it's more than some who are receiving discounted pricing. The logic that our pricing should be determined by our classification rather than our volume just seemed totally asinine to me. (Eventually they relented and gave us a discount for that project only.)

Another major factor for us is intellectual property. If you give your ideas to an integrator to provide you with a machine, what stops the intgrator from selling the same thing to your competitor? I know there are ways to handle this but the gray area is a little too large to be compfortable.

Another major factor for us is intellectual property. If you give your ideas to an integrator to provide you with a machine, what stops the intgrator from selling the same thing to your competitor?

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Non disclosure agreements.

Unfortunately, AB does not allow for competition since their distributors are territorial.

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Like the Pirate Code, think of distributor territories as guidelines. AB's first response will be to protect their distributors' territorial boundaries, but in the end, a high volume customer can have some input into where he buys his products. If AB thinks a large customer will switch to a competitor because of a dispute with a distributor, they will throw the distributor under the bus rather than lose the customer.

Steve Bailey said:

they will throw the distributor under the bus rather than lose the customer.

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Wish I could have done this with some sales guys i met over the years

I am an oem integrator for AB. I do buy from multiple area distributors
I can tell u this, AB sets the prices for their products so that even
going outside one's area, you are suppose to get equal pricing based
on your volume, but I can tell you that is not the real world. I do
bid the distributors against each other, and they know it. However as
an end user you are somewhat screwed, unless you have a corporate office
who can buy in volume, only thing I can recomend is buy from your
local distributor, because they are the ones who will support you when things go bad

I don't know if this is still the case, but it used to be that you could buy your A-B equipment wherever you wanted. They cannot make you deal with any one distributor. However, the distributor in your territory has the flexibility to cut their margin and sell to you at a reduced price that another supplier outside that territory is not allowed to do.

OG