WSJ.com – For Caterpillar, Commodity Boom Creates a Bind

WSJ.com – (Subscription Only)

A reminder that profit = price – cost, where the price is set by the market (not the old approach of price = cost + profit). Sure you might be able to increase your selling price, but that’s based on customer demand. Suppliers might have the same leverage over you to increase raw material cost, as is happening with Caterpillar. Only by reducing their own internal costs, and by helping suppliers do the same (as mentioned in the article), can you improve your profit. Don’t rely on price increases or squeezing your suppliers to cut costs the wrong way.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an book titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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