There is now an affordable pricing optimization solution for small and midsized manufacturers; this transformation will allow even the smallest manufacturer to utilize lean principles in the pricing process immediately.
Small Manufacturers Finally Receive Respect: Affordable Access to Competitive Pricing
Mike Franz, Founder | ManufacturingPower
Unsurprisingly, there has been a shift in manufacturing business process in practically every American industrial setting. The lean thinking paradigm now includes purchasing and supply chain functions.
Price optimization technology for large manufacturing operations costs from $120K - $1.5M per year. For multi-location, global, and publicly traded companies this is an expense easily cost-justified. A small 1% in margin preservation is worth thousands of times the expense of price optimization technology.
This pricing could not be justified by most of the 89% of small to mid-sized U.S. manufacturers with fewer than 50 employees. 2020 introduces a new affordable solution which provides access to pricing optimization with the ability to evaluate systematically. This new technology solution is priced at less than $5,000 per year.
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© 2020 ManufacturingPower
The manufacturing industry drives innovation in America. It is the birthplace of products and processes that make the world a better place. ManufacturingPower uses lean manufacturing principles by eliminating waste around industrial supply spend with market comparison and analysis. Based in lean principles there is an on-demand implementation process driving an immediate ROI and elimination of waste.
With access to unlimited “Part Number Matches” per year, even the smallest manufacturers realize significant savings, capture lost margin, and view costs versus peer market pricing. Insight to suppliers with the lowest costs, viewing potential savings, and tracking year-to-date savings, prove the efficacy of these new technologies.
PowerPotential Report: Step One
ManufacturingPower suggests that small manufacturers start with a free PowerPotential Report which includes easy data uploads, CSV and XLS file formatting, and insight into top six savings opportunities. Within 24 hours, this powerful data demonstrates where even the smallest manufacturers can start realizing significant savings with access and transparency to data.
Currently, manufacturers are spending far more than needed on tooling, fasteners, clean room supplies, packaging, and any line item in the supply chain. Originally, this cloud-based low-cost solution started as a software tool allowing manufacturers to anonymously share data and compare pricing. Through a network of data, this proprietary method saves manufacturing enterprises across their total industrial supply spend.
2020 still has tariff ambiguity in the market. Manufacturers, relying on forward-looking predictive models to set prices, are able to identify and reduce wasteful pricing processes while reducing over-discounting. Poor pricing methods effectively transfer the incremental profits from lean activities away from the company and into the pockets of customers.
Lower cost materials available
Instead of simply ordering from Grainger or other distributors out of habit, it would be nice to know if the price offered is the best price or even at market price by geo-location! The data are collected and shared by ManufacturingPower daily.
Products can be manufactured utilizing a variety of different materials, depending on marketplace requirements and the practices of the manufacturers.
When considering a change in the materials used, the manufacturing method may be impacted by increasing cycle times or labor costs. Changing the composition of a product may be worthwhile, even when the material costs are higher due to a simplified production process.
To continually order from the same vendors and suppliers without a price comparison is simply not effective. Larger manufacturers may be able to absorb a 2% margin loss; this kind of loss could shut the doors of a smaller manufacturer. Technology is constantly improving; prices move up and down due to market fluctuation as well as supply and demand constraints.
Managing the impact of price-cut mandates
Small and midsize manufacturers report the biggest 2020 challenges are price-cut mandates and online reverse auctions which compromise quality and endanger the business. Supporters of the practices say the strongest suppliers will survive, making supply chains more efficient. When operating margins are already thin, a rigorous and continuous process improvement mandates on-going SKU pricing evaluations for every element in the manufacturing operation.
About Mike Franz
Mike Franz is the founder and creator of the WorkCenter from ManufacturingPower, a cloud-based market intelligence solution designed to help small to mid-sized companies streamline and achieve real-time visibility into Industrial Supply spend, collaborate better with suppliers, mitigate risk, and realize significant cost savings.
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The content & opinions in this article are the author’s and do not necessarily represent the views of ManufacturingTomorrow
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