Global Pricing is Coming …
Recession or an Opportunity? Scary or exciting? Industrial Man suggests when the media talks of recession whether real or imagined it is time for manufactures to re-align their businesses models. Meaning get the best business model you can design; close your technology gap; and get your price down, secure local sales and block competitive imports through taking away price advantages.
- Business Model. In theory, it is becoming possible to buy, off the shelf, practically any function you need to run a company. Most firms bring in experts and contractors, even the back office, and long term hire of plant, firm?s partner with suppliers in India, China, and Russia, most already out-source from local New Zealand firms who specialize in areas they require. Do what you do best and leave the rest to others, may well be cost effective strategy. Down size in-house and expand throughout-sourced specialists.
- Close your Technology Gap. The cost to close the gap between available technology and technology in current use can often be traded off by reduction of labour costs, thus allowing the people who are displaced to solve other labour problems elsewhere in your organization.
- Get Your Price Down. We live in a time of pre-global one world price; which is a representative price where there will be little difference in prices for a component from China, India, or New Zealand. This might be 5, 10 or 20 years away, but it will come as the global workforce educates it-self and the owner’s of technology and know-how spread it across the world for others to share.
- World price is coming. If we were to start with today?s price and calculate the China true price of some manufactured components we might find this formula applicable: China price + use of money cost + delivery time cost + cost into your warehouse + quality issues cost (a few stories have emerged over the years of varying quality) + minimum volumes issues + set up costs. We might arrive at a finial price of a component landed at our warehouse 20% cheaper than current New Zealand price. This might well be the new global price for the future. It is a time to move to the right price now, through using an effective business model to produce your products at 20% less than previously, that might well include out-sourcing a major portion of your manufacturing operation to local NZ firms that specialize in that area.
Management challenges will grow more urgent as rising global salaries dissipate the easy cost gains from offshore outsourcing. The winning companies of the future will be those most adept at leveraging their out-sourced resources and talent to transform themselves and their industries, creating better jobs for everyone.
Industrial Plant Management is putting the idea to the test and looking at current costs of manufactured components (excluding materials) and looking how they can be made for 20% less. Industrial Plant Management is positioning itself to be well ahead of the game when global pricing hits New Zealand shores.