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Recently, I joined the OPPORTUNITIES IN PRINT IN THE ‘NEW NORMAL’ webinar, moderated by the Publisher of WHERE To Print magazine – Joju Adekanbi, along with over 240 other online attendees. This was the fourth in a series of webinars hosted by PROPAK West Africa organisers – Afrocet Montgomery UK – that have offered insights, from Industry Leaders and Experts, on how the Nigerian/West African Print Industry can adjust to the business world that we live in as we adjust to our existence under the spectrum of COVID-19.
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The Presenters had a wide and varied brief on the subject matter and all approached their own areas with assured professionalism. The one take away for me was a question from one of the viewers, posted as the webinars went live:
“How do you we serve the Nigerian SMEs that want low cost when the standard materials cost a lot? You know that SMEs are infinite but the companies that can afford it are few. Our pricing across the industry is not regulated and this means that if I set my price on high quality, one old man would bill a lot lesser with sub-standard tools but the client won’t know and won’t care. The truth is that most of these clients don’t last in their business so the sub-standard products last just as much” – John
Now, this question has almost nothing to do with COVID; the pandemic may have a bearing, in some areas but overall, the question would have same relevance, pre-COVID.
So, this got me thinking. How can a manufacturing philosophy, such as LEAN, help one’s business achieve, or enhance, competitiveness?
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(c) Kettering University Online
In this series of articles, I am going to try and answer John’s question by posing questions and providing answers, not all are Lean related but they are challenges that I’ve faced in a competitive market in the past, in businesses that I have managed.
First of all, let’s look at some numbers. If your sales are, say, $100,000 per annum and what’s left over, before Tax etc, is $20,000 (this is an arbitrary figure), that means that you are using $80,000 per annum in costs to sell your product. A print business posting 20% EBITDA numbers is doing well, particularly given that the paper/board will consume somewhere in the region of 40% but even at 20%, savings can be made.
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(c)PromoB2B
Every $1 you save in cost or reduce in waste, is one extra $1 on your bottom line; you don’t need to spend the other 80 cents to “earn” it. Saving money is a lot easier than selling product and by the virtue of logic, every $1 saved in your process makes your overall costs go down, sustainably, enabling you to sell more competitively and maintain profit.
If you are facing the same challenges, there can be numerous reasons for the competition to “win” work, so let’s posit a few:
1. They have lower overheads.
2. They are buying the same raw materials cheaper.
3. They are using different raw materials (cheaper/inferior).
4. They have an aggressive sales strategy to price out competition.
5. They need to absorb the cost of idle, expensive equipment.
6. They have a better relationship with the customer.
7. They are more efficient.
1. LOWER OVERHEADS.
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(c) HubTGI
Small businesses have lower overheads than larger businesses, and corporations have higher overheads than those. If it were merely overheads that dictated price competitiveness, then big business wouldn’t exist, but we know that isn’t the case. Small businesses can, generally, react more quickly and can generate profit on small revenue, because they don’t have the costs associated with complex infrastructure. If you are a small business competing with others and constantly losing out, then begin by looking inward, assess and deal with circumstances that you control. You have limited, or zero influence and control over your competition, theirs is no value in using time and effort to try to do exert any.
As an SME, you have much greater transparency over your business and therefore, your costs. Ensure that you identify the value stream and follow it, even the smallest of print shops can benefit from understanding and optimising the value stream; waste will almost always be found in a business that hasn’t considered the Lean approach.
2. SAME BUT CHEAPER RAW MATERIALS.
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(c) Mining.com
Many years ago, a company I worked for purchased a smaller competitor; this competitor used the same primary, raw material, as we were both in competition for the same customers (the banks). After the purchase had gone through, the new owners found out that the newly purchased competition had been buying raw material 5% below what they were paying.
The message here is, negotiate your prices as best you can. I would strongly advise over-stocking to achieve lower pricing (please see the article on Inventory in the Wasteful Thinking series) but building a solid supplier relationship can ensure competitive pricing in the medium to long term.
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(c) Disruptive.Asia
An argument might be that a large company can use volume as a negotiating tool, and this is true but keep in mind the above, they have higher overheads. If your business model is based around a narrow raw material specification, then there is little need to buy at volume and tie up cash for the business. Constant turnover of raw material can be just as valuable to a supplier as volume, as it generates payment and helps manage Working Capital.
I will discuss the remaining points across two further articles. If any of the points raised (and they are not exhaustive, by any means) interest you and you would like to discuss further then, please make a comment and we can get in touch.
© Andrew Malson is a highly experienced, committed and passionate Operations Executive/Director/Manager with a demonstrable reputation for creating the change required to deliver significant improvements in business performance through quality, service and productivity. He has invaluable strength in establishing and ensuring sustainable success of single, multi, and regional manufacturing sites by creating right and enduring cultural change through involvement and development of people. In the 30 years since beginning in the industry, Andrew has been responsible for the design and implementation of systems covering quality, people development, environmental standards and operational excellence. He brought his wealth of experience and invaluable knowledge to bear at WHERE To Print magazine in West Africa in its quest to positively influence and improve print purchase decisions with special focus on Lean Manufacturing Implementation; Organisational Effectiveness; and Sustainable Business Growth. Andrew welcomes your connection via wheretoprint@yahoo.comor directly vide andrewcmalson@gmail.com
