How to Negotiate a Lubricant Supplier Agreement

Noria Corporation
Tags: industrial lubricants

How to Negotiate a Lubricant Supplier Agreement

In this competitive economy, we are all doing what we can to reduce costs, improve uptime and maintain reliability. One of the ways that industrial facilities are coping with the economic meltdown is to negotiate new contracts with new lubricant suppliers in hopes that the new deals will have more savings built into them.

Often, the name of the game when sourcing new lubricant suppliers and writing new contracts is leverage. What's your annual lube consumption? Is this a corporate contract or is it applicable to one plant? Buying power always comes when negotiating large volumes. The more demand for product on one contract, the more leverage you'll have overall.

Size Matters
Obviously, the most maneuverable contract is the corporate contract. If all of your plants in all divisions have lubrication needs that can be covered by a single supplier, that supplier is likely to offer deep discounts based on the total annual consumption as a sum of all the plants. Your buying and negotiating power is the strongest in this situation.

If there are divisional needs to seek a new lubricant supplier, this also can prove to be a powerful negotiating tool depending on annual need and the number of facilities involved. It's important to seek a supplier that can provide you with as close to 100 percent of your lubricant needs as possible. Committing to a single supplier not only helps when negotiating contracts but also aids with inventory and procurement.

Local contracts have the least negotiating power in most situations. Unlike the other two scenarios, in this case, your facility would likely deal directly with the local supplier to arrange the best deal for a single plant. The other scenarios would see your company's corporate procurement team deal directly with the corporate sales team of the lubricant manufacturer.

Separate and Not Equal
Price and delivery expectations aside, the most important thing to remember is that the reliability of your equipment is paramount, and the need to ensure that the appropriate product gets into the machine cannot be overstated. After the deal is done, either corporately or locally, you need to begin swapping your current lubrication products for the new supplier's products. When changing lubricant suppliers, it is important to recognize three categories of product equivalents.

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Is It a Match or Not?
The challenge with changing from one supplier's product to another is being confident that the correct products are currently in place. If you have systems currently using inappropriate products, the supplier switch will only perpetuate the use of an incorrect product.

To help ensure that you have the correct product in place, it is always recommended that as products are gradually transitioned from one supplier to the next, you reference your Lubrication Process Design database to clarify the specific product requirements vs. the general requirements of one product to another product. If a current lubrication database does not exist, you must systematically work through each component in the plant and determine the correct lubricant for the application.

When selecting component-specific lubricants, it's important to adjust for operating temperature, ambient temperature, humidity and contamination, vibration, and duty cycle, trying not to generalize lubricant specifications for component categories.

It is also very important to consider the compatibility of the current product and the replacement product. Although replacement products may share similar attributes, they may not be compatible.

Flush and Fill
When changing lubricants from one product to another, it is a good idea to consider them less than fully compatible, though the supplier may consider them compatible based on past experience. Without proper compatibility data, it is not recommended to use one product on top of another. At a minimum, armed with compatibility data from the lubricant supplier, a complete drain is required on all fluid systems. For grease systems, a complete purge is recommended for housings that are equipped with vent or relief plugs. For grease systems that do not have appropriate venting or relieving plugs, a manual removal of grease is recommended before the new product is used.

Lubricants considered to be crossovers require a little more attention than a simple drain and fill. When product upgrades from mineral-based to synthetic products are recommended, a system flush using the new product is required. The system should be drained of the original product, filled with the new product, operated under normal operating conditions for 12 to 24 hours, drained and filled again. Oil analysis should be done after the last fill to compare against a new oil baseline.

When changing current products to competitive products known to be incompatible, it is recommended that a complete drain and fill with a system flush be performed, using the supplier's recommended cleaning solvent, to minimize the risk of cross-contamination.

Notes and Reminders