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Rebuilding profits in the manufacturing sector
How to manage profits and pricing
Managers in the manufacturing sector who institute value-based practices have seen dramatic increases in both revenue and profits. While the task is challenging, manufacturers who are disciplined, focused, and committed to profitable organic growth can reap the rewards.
Executives at manufacturing companies face constant pressure to lower costs, irrespective of the economic conditions. The manufacturers who succeed (as opposed to simply survive) will likely be the ones who focus as aggressively on the other side of the profit equation — driving revenues. Managing the revenue side of the profit equation can be easier and more beneficial than most manufacturers realize. Price leverage on profits is substantial; for many manufacturing firms, a one percent improvement in price can add substantially to the bottom line. Managers can capture this potential profit opportunity by focusing on two areas:
- Pricing based on differential economic value
- Proactively managing aggressive customer negotiations
The first task for managers in manufacturing firms is to communicate value to target customers in terms the customers can understand. It’s a supplier’s job to quantify and communicate it.