I am currently an Engineer at a company and I see how much stuff my company buys on a regular basis. It seems like there are a few items they buy that a machine shop with a lathe, mill, tube bender, and a few other machines could build for them. There are several warehouses close that are for sale and someone could possibly sell that purchased parts for the same price as other companies but there would be minuscule shipping costs. What would potentially be the dangers in trying to run something like this? I am happily working here but I would want to run my own business one day to be able to control my amount of time working and potentially control how effective a business could be. I feel like I have a lot of ambition but I never know if something like this could ever work. If I dumped 50k in it to get started and then it all fails.My company seems like it will always be big enough to have to buy certain parts because they just don't have space in their shop to make everything they need.

there are companies that serve to be consignment hubs adjacent to large manufacturing centers.

I know that it is possible but I am wondering what the headaches are and they things unseen to a normal person on the outside. There are a few companies that the company I work for basically keeps in business.

Questions you need to answer first:

1) Why is your company buying from its current vendor?
-Saving on shipping costs may not be enough to sway them to leave existing relationships, stable supply, good quality and service, etc. All of these things impact your company's ability to generate profit, potentially more than paying a lower price for machined parts.
2) Can you diversify and find other customers?
-Having a large account that provides a lot of revenue is great, but havin a single account that provides all of your revenue presents a huge risk. What happens if your biggest customer goes under, gets pissed and goes elsewhere, etc.

You may be on to an awesome opportunity, just make sure to prepare and have a plan. Also if you are successful with it, try to use the business from your first account as a building block to scale and diversify. Good luck!

The variable will not be shipping costs. Shipping costs are nominal when buying in large quantities. The variable will be the raw material costs and labor costs to produce. The company your company is buying from will likely have figured this out long ago and has spent years perfecting the process and squeezing extra margin from every corner of their business.

I don't mean to discourage you. Check it out, by all means.

This is also a primary reason for non business undergrads to get an MBA.

Your biggest challenge is going to be maintaining positive cash flow. Getting started with limited or no credit references the manufactures are going to make you pay in advance or maybe give you NET 30 terms. Your customer is going to force some ridiculously long pay terms like paying you in 120 days or taking a 3.5% discount to pay you in 30.

You have to have enough cash to take orders and get production started while waiting on the customer to pay you for orders you shipped months ago.

Am I to understand you correctly in that you would wish to open this other company while maintaining your current employment for awhile? I would think your direct supervisor(s) would have an issue with this and you may constantly be barraged with questions of where your concentration was truly at.

No. I would not try and open up a business while working for someone else. Just plans for the future as the next step in my career since I would ideally like to be my own boss and run a business instead of just doing engineering work all day.

Interesting to see someone thinking along similar lines. I've seen the kinds of things my company buys and the prices and it really makes you want to be a supplier

I would look into what it takes to become an approved supplier. That's a pain at my company, but getting better. Overall, if you can supply the commodities they need quickly and without trouble, they will go to you. Cost matters but is not the only factor. Be easy to work with, even if they are not. Coming from that company will give you an insight into the company culture and many of our vendors are former employees. However, don't rely solely on that one relationship.