What are the [4 key requirements for being the best gas cylinders supplier]?

— Let’s check them out on your current seamless gas cylinder supplier and save yourself from paying more for less

The industrial gas and gas containment industry is a very mature market. As a sales and an engineer who has been working in this business for over 8 years (I started in 2011 with a factory that produces steel and composite gas cylinders for Natural Gas Vehicle, a.k.a. NGV), I often find myself the youngest or at least the one among the much younger side of the crowds in an industry conference or exhibition. During the last 8 years and still counting, I have visited or exhibited in many exhibitions and have exchanged my business cards with numberless customers and suppliers. Often, I still find that there are bits of knowledge that I did not know before or questions that I can not precisely respond to.

Question: Then, what good are you able to give out in this post?

“Though not the most knowledgeable person in the industry, I do have my thoughts to share regarding [ What it takes to become the best gas cylinders supplier: the 4 key requirements ]“

The points I am going to summarize may apply to many industries.  However, how I am going to explain these 5 points, may still give you some insights that you may not know, even if you have been a buyer for more than 8 years. So, here we go:

1. Price

   • Nowadays, it’s not a common approach for many industries’ manufacturers/suppliers to put “Lower Price” as their #1 advantage, over quality, brand, and many other factors. OF COURSE! Who would mind “making more profits by selling the same products, without talking about the ‘actually lowered cost’“? YES! ACTUALLY LOWERED COST.

   • First of all, to realize the ACTUALLY LOWERED COST, we must understand “what makes the cost of a product like a cylinder”? Here is a basic formula to calculate the cost:

     • Cost = Material + Labor + Power + Depreciation of machine + Operation Cost + Packaging/Logistic + TAX.

   • I am not a cost accountant, but these should have included most of the factors that make up the cost, right? Yes and Nope. Why? Yes, because the formula itself is correct, and it leads to a quite stable cost for manufacturing the same product, while there is no significant factor change. However, some of the factors are actually not so “stable”, and the unstable factors may create chances for the manufacturer to bring down the cost. The secret ingredients I am referring to, are:

     • TAX REBATE RATE

       • [Tax Rebate Rate] is a tool that many governments use to stimulate the export of goods made in their own country. As the largest exporting country, China also has tax rebates for goods that exported to overseas. Here is the address [CHINA STATE TAXATION ADMINISTRATION] for you to check the current tax rebate rate for each category of products according to it’s HS code. For cylinder products, the HS code commonly used is 7311.00.##. In some cases, other HS code such as 842490 is also used for cylinders that are used as part of fire extinguisher. Take the HS code 7311.00 as an example. In the third quarter of 2018, China State Taxation Administration decided to reduce the VAT rate from 17% to 13%, while keeping the same tax rebate rate for this category on 13%. What does that mean? It means if a factory used to pay 17% VAT and get the 13% rebate after exportation, they will get the same 13% rebate while they are required to pay the 13% as VAT after the third quarter of 2018. In other words, factories that need to pay 4% of VAT will no longer be required to pay VAT.

       • How is this Tax Rebate Rate policy related to the buyer? Yes, it is related to the buyer because it is a good reason for you to ask lower procurement prices while your supplier is paying less in TAX. Of course, the suppliers will generally reduce their selling price as a result of competition. But, wouldn’t it be better if you can ask for it before others will get a better price?

       • Do you know other HS codes that people use for export/import of gas cylinders? Leave a comment below or write to us, so we can put them here as well.

     • CURRENCY EXCHANGE RATE

       • This is something almost everyone knows about if they are frequently importing goods from overseas. Some big buyers will sign a contract to fix the price for the whole year so that their procurement price variation will not cause an unstable selling price in their own market. However, if you think the US dollar/CNY exchange rate might go higher in the following months which is a good reason for you to ask a lower price. It might worth your consideration to put this exchange rate into consideration while negotiating with your supplier for a formula to adjust the procurement price according to the actual exchange rate.

     • RAW MATERIAL COST

       • Not like some equipment that requires a lot of components, steel gas cylinders are purely made from steel tubes and the paint powder used for the color of the surface. In this case, the buying price of steel tubes will significantly influence the manufacturing cost of steel gas cylinders. In a normal situation, the raw steel tube material price will not change significantly or frequently. However, the China government does have a plan to reduce steel production by 150 million tonnes of steel production capacity by 2020. This will, of course, have an impact on your buying price, so it will be wise for you to monitor the steel price in China so you can plan in advance for your own marketing or procurement strategies. Or if your buying quantity is big, you can also go straight to the steel tube supplier to sign an annual procurement contract based on your annual procurement plan to secure a best price with your cylinder factory so that you will have total control. If this is something you are interested in, here is some of the common steel tube suppliers for the seamless steel cylinder industry:

         • CITC Pacific Steel Group

         • Hunan Hualing

         • Tianjin Runde Zhongtian

         • DAYE Special Steel

         • Jiangyin Yueyuechao (TEL: +86 (0510)86573805)

         • …

2. Quality

   • When you know more about the factors that will influence the price, the most important thing for paying the price is that you will get the quality you are paying for. Though in different countries and applications, cylinders are mandatorily required to pass correspondence testings according to the national, international, or industrial standard by an independent third-party inspector. However, sometimes this is not sufficient for making sure the quality actually 100% RELIABLE. Back in 2015, I knew a case from my client that their supplier actually supplied them cylinders made in 2015 with stamping says “2105”, and the total quantity is more than 3 batches (over 600 pcs). This problem caused the client to switch supplier and a loss of over $60,000. These cylinders were actually tested and certified by a famous third party according to ADR/RID 2017 EN ISO 9809 (TPED). After working years in this industry, I have known many similar cases that have caused the loss of both the buyer and the supplier. So, if it possible, we definitely suggest customers send their own independent and experienced inspectors for quality review before shipment. If it is difficult for you, SINO GAS AND EQUIPMENT SERVICES LIMITED can provide this kind of service at a very competitive cost.

   • Here below are some of the cylinder defects that can be easily overlooked and will cause you financial loss, listed behind are the ways to prevent them by additional inspection:

     • Type of Problem	Problem Description		How to prevent	Inspecting Portion
       1. Stamp Problem	1.1 Repeated Number		1-1 Random Inspection Will check the stamp info to avoid this type of problem	20 out of 200 pcs, including the first one and last one of the same batch
       	1.2 Wrong Stamp		1-2 Random Inspection Will check the stamp info to avoid this type of problem	20 out of 200 pcs, including the first one and last one of the same batch
       	1.3 The gaps between letters are not unified		1-3 Random Inspection Will check the stamp info to avoid this type of problem	20 out of 200 pcs, including the first one and last one of the same batch
       	1.4 One letter overlaps another letter		1-4 Random Inspection Will check the stamp info to avoid this type of problem	20 out of 200 pcs, including the first one and last one of the same batch
       	1.5 Lack of letter depth, made it difficult to read		1-5 Random Inspection Will check the stamp, and will ask the workshop to rework once the problem is notified.	50 out of 200 pcs, including the first one and last one of the same batch

     • 2. Concentricity Problem	2.1 The Verticality Problem		2-1 Random Inspection The concentricity is a combination of perpendicularity and ovality. The perpendicularity is related to the process and tool of concave bottom shaping while the ovality problem is related to the heat treatment process. The perpendicularity problem can be significantly improved by process control and changing tools.	20 out of 200 pcs, including the first one and last one of the same batch
       	2.2 The roundness problem		2-2 The roundness failure is a result of failed heat-treatment. Usually, a qualified roundness is ±1%. However, even if this can not be achieved, we can manage to make 60% of the cylinders within ±1.5%	20 out of 200 pcs, including the first one and last one of the same batch

     • 3. Appearance Problem	3.1 Cylinder shoulder problem The radian rate is not unified at the shoulder part of the cylinder		3-1 Random Inspection	20 out of 200 pcs, including the first one and last one of the same batch
       	3.2 Inner surface problem The inner surface is not polished to an acceptable level		3-2 Random Inspection	20 out of 200 pcs, including the first one and last one of the same batch
       	3.3 Length Problem The length of the same model is not unified		3-3 Random Inspection	20 out of 200 pcs
       	3.4 Weight Problem The weight difference of the same batch cylinder is beyond an acceptable range		3-4 Random Inspection	20 out of 200 pcs The standard does not have a requirement regarding weight difference tolerance. This needs to be confirmed if there is such a requirement.
       	3.5 Label Problem		3-5 Random Inspection

3. Services

   • Supposedly, you have now got the competitive price and reliable quality that you have been looking for, is that the bottom line yet? No, not yet. Next part, how is your communication with your supplier? Are they preparing the documents you required in a professional way? And are all your questions responded promptly? Would they provide services to help you solve your problem, even if it’s not their responsibility?

   • At SINOGES, our experienced sales and technicians are online every day and can respond within 24 hours. Besides providing our customers the reliable product at a competitive price, we  also help customers with services of:

     • Procurement of tools and equipment

     • 

     • Mix the customers’ products from different suppliers to integrate the logistic in the fully loaded container(s), at the best logistic cost

     • 

     • Help customers to obtain special CCPIT/Embassy certificate for commercial documents without adding profit

     • 

     • Help customer to organize the itinerary for their business trip in China, including booking hotels and tickets

4. Certificate

   • Alright, you now have got an excellent supplier who is experienced enough to help you deal with all kinds of problems while providing you the reliable products with competitive prices. In other words, you trust this supplier and are ready to build long term cooperation with them. Now, is this the bottom line? NO, A GOOD SUPPLIER CAN DO MORE THAN THAT!

   • Price is naturally one of the key factors to consider when you need to choose a supplier. Then, how about a supplier that can strategically help you to reduce the cost by strategic negotiation? What does that mean? Something you may not aware of is that the cost for the certification can make up a big portion is the cost, except for those points we have mentioned at the very beginning of this post. For example, some customers in the marine industry (e.g. life raft manufacturer such as Viking Life-Saving & Survitec, Marine fire suppression system contractor such as Minimax & JCI Tyco) will require classification society certificate (ABS, BV, CCS, DNV/GL, LR, KR …) for their application. In this case, the cost of these certifications can be extremely heavy as these third parties usually charge by the hour. And if the supplier is only inviting them for certification of your batch of 200 pcs, then the cost divided into each cylinder can be as high as tens of US dollars.

   • What we can do, is to integrate the marine certificate requirements from different customers so we can negotiate the best inspection rate from any of these third parties. In some cases, we can help our customers to reduce the cost by more than 50% on the certificate. Don’t you believe it? Just let us know your annual requirement for these marine cylinder products, we can provide you a quote that may exceed your expectations.

Let us know if you have any comments or if you want to try our services with one container to kick off, you won’t regret you tried.