This ties directly to the Toyota article from the other day and the concept of Profit = Price – Cost. The Industry Week cover story focuses on companies who work hard to mitigate cost increases without relying solely on price increases to the customer. This blurb is about an office supply manufacturer in New York:
“With Esselte’s previous lean work, combined with Brooks’ plan, he says pricing hasn’t been an issue so far, noting that he hopes to be able to mitigate more of the material costs with increased efficiencies. When it comes to pricing, the company is looking to end-users to determine what the market will bear. ‘A customer is going to pay a certain price for a product, and if your price is too high, they won’t buy it and, sometimes, if your price is too low, they won’t buy it. We’re trying to understand what the end market is and make sure that our cost structure allows us to make some profit based on what the market is willing to pay for our products.'”
A related story about increased labor costs is here. Whether it’s material or labor costs — use lean to find ways to get more efficient to offset those costs. Your hourly labor rate has gone up? Reduce waste from your process so you can build more product with the same number of people. Material costs have gone up? Redesign your product in a clever way so less of that material is required.
Thanks for reading! I’d love to hear your thoughts. Please scroll down to post a comment. Click here to receive posts via email.
Now Available – The updated, expanded, and revised 3rd Edition of Mark Graban’s Shingo Research Award-Winning Book Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement. You can buy the book today, including signed copies from the author.