The lowest price is never the best price, the cheapest one always the most expensive

“When searching for a grain storage solution, it is critical to look beyond price. Admittedly, price is important, but it is a mere starting point. Equally as important should be finding a provider who values accuracy, and offers additional services beyond basic construction and equipment. Simply put, value is to be found in many places – price is but a number, and your success is measured by far more than one number. Companies do not excel for over 70 years by focusing on price alone. Find your value, and settle for nothing less.”peter

Peter JANKOVICS
Regional Business Manager
Europe- Central Asia- Africa & Middle East
BROCK GRAIN SYSTEM

Let me share some thoughts about GOOD QUALITY storage of grain. At first, this may seem to be something that has already been over-discussed, but many people make these same mistakes each year when they make an investment in grain storage.
I am the Regional Business Manager for Brock Grain Systems, but for this article, the brand I represent is not important. What is important is that I am responsible for a huge area – more than 50 countries – and this gives me a unique perception and view of how millions of dollars in grain storage decisions are made.

In approximately 80% of the decisions I see, decisionmakers choose the company that offers the lowest price, citing low prices and investment value. Unfortunately, these two things have nothing in common. In fact, in my opinion, the lowest price is never the best price. Large-scale grain storage investments are expected to operate for decades; yet the investment value does not become fully apparent for many years.

Consider a simple example that shows that a cheap price does not equal value when we take into account volume and quality.

Let us start with a 100,000 MT storage complex – including grain storage, silos and equipment – everything needed for professional, high-quality grain storage with minimum loss.

An investment of this scale can be made the most economically with eight pieces of 12,500 MT grain storage. I collected cost data from manufacturers throughout the market. The lowest offer on the market is $2.142 million USD, while the most expensive offer is $3.15 million USD. The difference between the cheapest and the most expensive offer is 32%, which is $1.08 million USD.

At present time, the world market price of wheat is $527 USD/MT*. In our 100,000 MT grain storage facility, the value of this grain is $52.7 million USD, if the grain storage facilities are full. This means that the value of grain is 18 times larger than the investment itself.

I think this is a distinctive difference.
There is a huge difference between the value of the stored goods and the investment value. And the loss of grain quality during storage must also be included.

This leads us to the next calculation, in which we examine how other manufacturers’ products can protect grain quality, and in turn, how they can protect its value.

To keep our calculations simple, let’s use as an example 0.2% for the worst case and 1.2% for the best case quality loss. This is reflected in a price change of the same ratio, meaning that 1% quality loss results in 1% price reduction. (Of course the numbers are much higher in reality, but this will easily highlight the trend for our example.)

Using these numbers, the value of loss is $527,000 USD in the whole cycle (calculated with 1% loss).

This means that based on the above-mentioned difference between the historical cost of the cheapest and the most expensive systems ($1.08 million USD), we recoup the difference in two years with the quality loss in mind.

If we assume 20 years of working life, and our storage facility is filled only once per year, we realize $10.5 million USD.

Is it worth it to choose the cheapest option? Manufacturers pay continuous attention to the quality of grain placed in the grain storage facility, and undertake years of research and development to help preserve grain value.

It is not enough to copy a steel structure, a building, and then sell it. We cannot say, “It is only a grain storage facility, and it serves the same goal as any other.” If this is the theory, we should say that all cars are the same because it is possible to move from point A to point B with any of them. That would be a mistake.

A proverb says, “We are not wealthy enough to afford to choose the cheapest.” We should take heed, because it will save us money.

At the end of the day, the cheapest investment, or at least the one that seems to be the cheapest, will be one of the most expensive.

This should be notable for those who aim to build a profit-oriented business, where performance and quality are more important than decisions based on short-term interest.

When searching for a grain storage solution, it is critical to look beyond price. Admittedly, price is important, but it is a mere starting point. Equally as important should be finding a provider who values accuracy, and offers additional services beyond basic construction and equipment. Simply put, value is to be found in many places – price is but a number, and your success is measured by far more than one number. Companies do not excel for over 70 years by focusing on price alone. Find your value, and settle for nothing less.

*(https://www.nasdaq.com/markets/wheat.aspx?timeframe=7d)

We also suggest you to read our previous article titled "The milling industry in Morocco".

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