One of the hardest Business models to succeed in is;
Commodity Based Manufacturing. The United States is being over run by many other countries in this industry, and let me tell you. It is a very ominous sign!
Think about it for a moment. You are in the commodity business, which means, your raw materials are being priced differently on a second to second pricing exchange.
Then not only that, you are dealing with manufacturing costs that MUST stay consistent in order for you to price your product right, to make a buck. Wrong! I have a suitcase full of solutions for this, but let's move on.
Wow. Right? This isn't making.........well let me take that back. A lot of businesses are dealing with some sort of a commodity as a raw material. So this article is all about minimizing your Cost of Goods and maximizing your Gross Margin!
pretty simple stuff, right?
Wrong!! This is by far, the most complicated of all models. Why do you think so many company's outsource their manufacturing?
I know all about the do's and don'ts of this business, as I was the owner of a coffee roasting/manufacturing facility for 22 Years! The business changed drastically from say 1989 until now! Everytime we had to increase prices due to increasing green coffee prices, it seemed like everyone, especially the sales force, wanted to run out the door! It was insane.
Rule #1 When Facing A Price Increase!
-Educate Your Customer's. They are not stupid. If you just explain the situation ahead of time, you will be much better off!
The thing that really irks me is, that the company's still trying to do this in this country just aren't doing it right! I mean from the little guy, manufacturing $500,000 of product a year right up to our multi-national giants who produce billions of units per year of these products.
Now, can you outsource and get "nearly" the same product for less money? Probably, I mean absolutely if you have any experience at your business. But............ Here is the crux of the matter.
America or should I say, American manufacturer's aren't coming up with the right way to market to the masses, why this product X costs more! It's really simple guys and girls! I will promise to give you a mind blowing solution by the end of this rant. Really.
It is a shame though. It shows me that there is a clear lack of good 'ol American innovation. In my opinion many of these products, if managed correctly can be made right here, at a VERY competitve price.
The problem is we have turned from an industrial country to a technical one. That is too bad, because look at America's numbers when we were the Mecca of Industrialization/Manufacturing! What happened?
We need to get back to that model and make it work, otherwise, other countries will be getting so much more of the benefit. We are rapidly becoming the weak link in the industrial sector. That needs to change people!
How many extremely smart young adults have you met lately that would say, "i am going to school to start my own business in manufacturing in X City in America?#madeintheusa
Now, how many do you know that are focusing on the internet, software company's,marketing,Hi-Tech, lawyer's(aaaargh) oh excuse me, or anything but what I have written above. Well technically high tech could lead to manufacturing, but that is not the kind I am talking about. So let's leave that out for the sake of this article.
Even the one's that are inventive or just want to take over the old family, candy manufacturing business would probably tell you, that when they get out of their MBA program, they will take over, cut jobs and OUTSOURCE the manufacturing to XYZ Company in Maylaysia or China or wherever?
What do you think the percentage would be?#manufacturing
Where is the next Henry Ford? Where is the next George Schulz even?
I wonder, and it is sad. Because manufacturing creates jobs, and sustainable jobs, long lasting jobs. That's why you rarely hear of people retiring from a company after 46 years of service anymore! When was the last time you heard that?
That is what made America great! We need that back again!
How does it happen? It is a pretty Simple Answer everyone!#manufacturinginamerica
Give your end user, MORE value than before! Now I can go deep into the mathematical steps it would take, to actually give your customers MORE in perceived value but, that would take a novella.
But that is my simple answer. Give your customers added value that costs you a lot less than the actual price increase, yet solidifies your customer base and adds more % points to your Gross Margin!
Pretty simple answer, but the right one.#businesscompetition
Golden Rule #2
When you are facing an inevitable price increase, Do Not Hesitate.
Go up aggressively(make sure you are more than covering your Cost Of Goods Sold/Raw Materials acquisition costs!). The goal here is to only raise prices Once! Believe me, this is huge! So, be aggressive and decisive, make sure you cover yourself by actually securing your forward purchases! Don't try to be Mr. Homerun, and start hedging your purchases, YOU WILL GET BURNED!#secureyourmargins
When you do this, and this is where SO many company's get it wrong. Give your customer's an added value, for FREE! This will almost always guarantee a much greater customer retention!
I can't give away all of my ideas but if you take away my last statement and really think hard about it, the solution is in there.
Please No More "New And Improved" Stickers on products that company's have bartered with a senior buyer to get more shelving space! Please no more "NEW Formula" stickers. Just give consumers or end user's a little gift for paying more. But before you do, make sure it is just that VALUE!Not just some lazy "throw in", believe me, your customer's will recognize it and not only absorb your price increase, but maybe even a few will Thank You!!!
Please contact me at [email protected]
for any kind of help you need with your business.#henryford
Thank you for reading this. I appreciate your time.
Joe Leary
Commodity Based Manufacturing. The United States is being over run by many other countries in this industry, and let me tell you. It is a very ominous sign!
Think about it for a moment. You are in the commodity business, which means, your raw materials are being priced differently on a second to second pricing exchange.
Then not only that, you are dealing with manufacturing costs that MUST stay consistent in order for you to price your product right, to make a buck. Wrong! I have a suitcase full of solutions for this, but let's move on.
Wow. Right? This isn't making.........well let me take that back. A lot of businesses are dealing with some sort of a commodity as a raw material. So this article is all about minimizing your Cost of Goods and maximizing your Gross Margin!
pretty simple stuff, right?
Wrong!! This is by far, the most complicated of all models. Why do you think so many company's outsource their manufacturing?
I know all about the do's and don'ts of this business, as I was the owner of a coffee roasting/manufacturing facility for 22 Years! The business changed drastically from say 1989 until now! Everytime we had to increase prices due to increasing green coffee prices, it seemed like everyone, especially the sales force, wanted to run out the door! It was insane.
Rule #1 When Facing A Price Increase!
-Educate Your Customer's. They are not stupid. If you just explain the situation ahead of time, you will be much better off!
The thing that really irks me is, that the company's still trying to do this in this country just aren't doing it right! I mean from the little guy, manufacturing $500,000 of product a year right up to our multi-national giants who produce billions of units per year of these products.
Now, can you outsource and get "nearly" the same product for less money? Probably, I mean absolutely if you have any experience at your business. But............ Here is the crux of the matter.
America or should I say, American manufacturer's aren't coming up with the right way to market to the masses, why this product X costs more! It's really simple guys and girls! I will promise to give you a mind blowing solution by the end of this rant. Really.
It is a shame though. It shows me that there is a clear lack of good 'ol American innovation. In my opinion many of these products, if managed correctly can be made right here, at a VERY competitve price.
The problem is we have turned from an industrial country to a technical one. That is too bad, because look at America's numbers when we were the Mecca of Industrialization/Manufacturing! What happened?
We need to get back to that model and make it work, otherwise, other countries will be getting so much more of the benefit. We are rapidly becoming the weak link in the industrial sector. That needs to change people!
How many extremely smart young adults have you met lately that would say, "i am going to school to start my own business in manufacturing in X City in America?#madeintheusa
Now, how many do you know that are focusing on the internet, software company's,marketing,Hi-Tech, lawyer's(aaaargh) oh excuse me, or anything but what I have written above. Well technically high tech could lead to manufacturing, but that is not the kind I am talking about. So let's leave that out for the sake of this article.
Even the one's that are inventive or just want to take over the old family, candy manufacturing business would probably tell you, that when they get out of their MBA program, they will take over, cut jobs and OUTSOURCE the manufacturing to XYZ Company in Maylaysia or China or wherever?
What do you think the percentage would be?#manufacturing
Where is the next Henry Ford? Where is the next George Schulz even?
I wonder, and it is sad. Because manufacturing creates jobs, and sustainable jobs, long lasting jobs. That's why you rarely hear of people retiring from a company after 46 years of service anymore! When was the last time you heard that?
That is what made America great! We need that back again!
How does it happen? It is a pretty Simple Answer everyone!#manufacturinginamerica
Give your end user, MORE value than before! Now I can go deep into the mathematical steps it would take, to actually give your customers MORE in perceived value but, that would take a novella.
But that is my simple answer. Give your customers added value that costs you a lot less than the actual price increase, yet solidifies your customer base and adds more % points to your Gross Margin!
Pretty simple answer, but the right one.#businesscompetition
Golden Rule #2
When you are facing an inevitable price increase, Do Not Hesitate.
Go up aggressively(make sure you are more than covering your Cost Of Goods Sold/Raw Materials acquisition costs!). The goal here is to only raise prices Once! Believe me, this is huge! So, be aggressive and decisive, make sure you cover yourself by actually securing your forward purchases! Don't try to be Mr. Homerun, and start hedging your purchases, YOU WILL GET BURNED!#secureyourmargins
When you do this, and this is where SO many company's get it wrong. Give your customer's an added value, for FREE! This will almost always guarantee a much greater customer retention!
I can't give away all of my ideas but if you take away my last statement and really think hard about it, the solution is in there.
Please No More "New And Improved" Stickers on products that company's have bartered with a senior buyer to get more shelving space! Please no more "NEW Formula" stickers. Just give consumers or end user's a little gift for paying more. But before you do, make sure it is just that VALUE!Not just some lazy "throw in", believe me, your customer's will recognize it and not only absorb your price increase, but maybe even a few will Thank You!!!
Please contact me at [email protected]
for any kind of help you need with your business.#henryford
Thank you for reading this. I appreciate your time.
Joe Leary
This post first appeared on One Man's Journey In The Coffee Industry And Life, please read the originial post: here
