Pricing, productivity and competition for British manufacturing caught in the Made in Britain Twitter net: 15 April 2021

EVERY Thursday at 1pm Made in Britain hosts #madeinbritainhour on Twitter. During that hour Made in Britain asks questions of its 19,500 followers and the results are fascinating. Previously this information was enjoyed by the audience at the time and then left to drift away in the Twittersphere, rarely read again. So, we have decided to capture some of the best comments and re-present them for a new audience and easy reference. Some of the responses have been edited but most have been left in their casual Twitter style.

This week we look at pricing, productivity and competition For British manufacturing.

Question one: Is it inevitable that the price of British manufactured goods will have to rise this year as a result of various factors including material costs? 

Response: Paper cost prices +20%. Other raw mats 8%, Freight for components up. We will try and stay within normal inflationary 2-3% but with many balance sheets hit by covid, some price increases are inevitable

Made in Britain: Do you see these as permanent increases in material costs or is it likely to level out in time?

Response: I think paper is more likely to revert. It’s like the Wild West with prices moving all over. Covid having a very disruptive effect on formerly stable markets with production and freight delays, coupled with spikes and troughs in demand.

Response: Hope so! 

Response: Not necessarily. We now use 100% #recycled #plastic from within the #UK! Its readily available and cost comparative!

Made in Britain: How has the cost of recycled plastics changed over the last few years?

Response: Prices have increased, along with everything else in a 'free' market, but continuity, quality and availability are far more assured when sourcing locally; and of course the environmental footprint is much smaller! ust some of our new range of #recycled materials

Made in Britain: Is the supply/demand of recycled plastic changing with time? who is keeping up with who?

Response: I think it's a wee bit of both! As #recycling technology improves cleaner and 'purer' #recycled materials become more available that were not achievable two years ago. This is where SME's can steal a march on the larger players, to lead in promoting a more environmental approach

Response: It must depend upon your customers. Brexit will ultimately lead to higher costs due to added bureaucracy and delays, and so businesses will have to adapt prices. Delays in the supply chain - caused by the pandemic - might have similar repercussions

Made in Britain: Does that raise the question as to when you do make price changes? And if you are in a sector where prices move two ways?

Response: I think the timing is vital here. This year, an increase in price may turn off UK customers due to economic uncertainty after the pandemic. But that doesn't mean we won't have to continue paying this into the future.

Response: Which is better - a series of small price increases or one big one (maybe when it becomes business critical)?

Response: Perhaps one big one along with an explanation as to the reasoning behind the increase. A series of small increases may appear as though you are attempting to hide the fact it is increasing and by the amount it is

Response: Also depends how big is big!

Made in Britain: Do businesses adjust both ways? or should that be do all businesses adjust both ways?

Response: From a customer experience perspective, incremental is better as it is expected. Sudden correctional increases are noticed and prompt alternate sourcing

Response: How 'big' is 'big' is an important question to ask... But major increases in price are sure to put potential customers off - and perhaps lose repeat customers too.

Response: This is where service and quality come in. not everyone buys on price. Low failure rates, high quality and great customer experience can mitigate a price increase. 

Response: Really good point, Nigel

Response: With such large increases in costs and some businesses needing to retain margin what else could they do?

Response: Having spent the last 20 years sub-contracting to low labour cost countries, there has always been the time when reshoring will be needed. New production facilities with robotics and automation can help reduce production cost.

Response: Will businesses take the financial "risk" to do this?

Response: Long term planning would highlight opportunity. Low labour cost countries have growing wage bills as their citizens look for more pay for the work they do. We have seen industries move from Japan to Korea to China to India, eventually running out of countries 

Response: Also, sustainability does play a part, and local will ensure a lower carbon footprint

Response: The cost of moving production can also be considerable and take time. If you do it many times it may not be worth it.

Response: It has not stopped British based companies move production, with political funding, move to Eastern Europe. We are now in a position to bring back essential manufacturing with state of the art production facilities for future growth.

Response: There is already a lot of manufacturing that takes place in the UK...this will mean that there will also be more local sourcing within that value and supply chain

Response: I think it depends on the buying cycle, esp. with repeat buyers. With large contracts, prices will be fixed or tied to inflation. On the other hand, If prices start to go up across sectors, then the prices will go up for all. Incrementally it will not be seen as a large increase

Response: That's an interesting point and also raises the question about lead times and contracts, if prices of materials are going up how do you ensure the margin on a contract with a long lead time for delivery?

Response: Discuss and arrange with the supplier/buyer at the beginning. Contracts are there to be complied with to protect both parties

Response: I would propose that any long-term contract will have caveats for material price and exchange variances in them. All of the projects I have worked on in the past had them as standard

Response: Do you think most contracts do?

Response: No! So happy with the sale they forget to scrutinise the detail. Speak to contract lawyers before signing. The contract should help to protect all parties. 

Response: That becomes ever more important with longer-term contracts and repeat business. If that isn't in the contract and hasn't been discussed there may be large increases in price for the repeat order.

Response: With knowledgable customers and metal prices linked to LME, raw material price fluctuation is accepted. Significantly increased packaging and logistics costs currently have a material impact on prices that are harder to pass on

Made in Britain: Packaging has been mentioned by @AlltradePrintertoo. Is this a permanent increase do you think? what else could you do?

Response: At the moment our suppliers have all said that they don’t know

Response: Becomes a challenge about knowing whether to change/innovate or whether to just take the increased costs? Many businesses would probably just accept the increase

Response: We have shopped around and found new suppliers and we encourage our suppliers to let us know if we need to order pallet quantities, complete boxes to keep the price down etc . . . 

Response: We try to mitigate this by re-using packaging (timber cases) from UK customers but not viable from export.

Made in Britain: The price of timber cases must have gone up considerably over the last few months?

Response: I think we can expect higher prices along the value chain

Response: Raw material and transport prices affect all manufacturers wherever they are based. Key differentiators are modern production systems, good exchange rates and quality.

Response: Could we argue that shortening supply chains should help to mitigate some of the increased transport costs?

Response: This has a double-edged benefit. Sourcing locally helps local business/jobs and reducing the distanced travelled helps the environment

Response: Yes everyone must look at the environmental impact before making any “long distance” buying decisions

Response: We have already had price rises for our packaging. We have also got advance notice of more price increases for raw materials from EU from various suppliers. Already this has meant customers are looking at alternatives and other options.

Response: As said earlier than paper cost prices up 20%. What is the alternative other than to pay it and pass the costs on through price increases?

Response: We have been looking at ways to buy alternative materials and with some jobs we are completely changing the way they are done

Response: Not necessarily. Due to our UK supply chain, we've kept our prices the same or even reduced them on some ranges this year. We have noticed our printing costs have gone up though as a lot of our UK print suppliers use material sourced internationally

Made in Britain: That's what @AlltradePrinters have been saying about printing. Interesting to hear you have reduced them - can we ask the reason why?

Response: LINIAN clips are up to 3x faster to install than other methods, so they save the installer significant labour time and costs, but at the point of purchase, a perceived higher cost can put some installers off from trying something new. Lower price = more customers trying them.

Response: smaller margin, larger sales quantity can be the perfect formula for success. It's easier bringing the price down than putting it up?

Response: Yes!

Response: An offer of a couple for trial for FREE May get installers to “try before you buy”

Response: We do that too :) We have lots of young installers asking for sample packs to take into work and show their boss. It's so nice to see the next generation passionately getting behind the products and taking pride in their work.

Question two. How can British manufacturers ensure that they are not beaten to a contract win/sale purely on price? 

Response: It's worth keeping in mind that you ought to avoid a 'race to the bottom'. If the suggested pricing does not work for your business, it will likely be better for you to walk away and look for other contracts

Response: and how many businesses race to the bottom because they "need work" to survive a bit longer?

Response: In the print industry it seems to be the norm!

Response: It's definitely a moot point with lots of caveats but in the case of plastics fabrication/engineering, aspects such as quality and performance are typically more pertinent than price. Similar to what @NigelTPacker mentioned earlier

Response: It’s a difficult one but sometimes you have to walk away and find other customers that appreciate everything else but price

Response: and equally it raises the question "How do they make it for that price" - there can be learning points both good and bad from that? Maybe they can't

Response: In the past 2-3 years we have seen a lot of print companies close down as their prices were just not possible!

Response: Wonder if this is similar across other sectors? selling on a price with their fingers crossed?

Response: We add value to the products we sell in terms of technical knowledge, regulatory expertise and marketing experience. There may be cheaper alternatives but in our industry our strengths add value to client relationship. Cheaper alternatives can cost more money in the long run

Response: Sourcing locally with reduced lead times can result in lower order quantities, improved cash flow, less space required, reduced obsolescence. We’ve got to sell the benefits

Response: Does reduced order quantities result in an increased price per unit?

Response: Dependant on the context of the business and specifics of the product but it needn’t do so in many cases if you gear your production processes to enable that level of flexibility.

Response: This then leads to @NigelTPacker point about contracts. If the contract benefits both parties then the quantity could be worked into it to allow for flexibility at the same price?

Response: I have worked with many start-up businesses that start with the idea "cheap means more work". They soon learn it is not about price, but the relationship you have with the customer. Many are now earning good money because they increased their prices.

Response: Increasing prices is often a learning experience, easy option is not to and compete on price, but then the differential gets bigger and bigger and you realise it isn't sustainable, but then can't then make a huge increase...

Response: The conundrum of the financial director. What are your worth? Added value is more than an extra widget. It is quality, relationships and service.

Response: A response which is true 'tho trite: by intelligent mktg & offering superior quality, product features & functionality, service & brand. Delivering these (& other essential business KPIs) is a moveable feast which requires in-depth, comprehensive dev't.

Response: In our industry fire safety is one of the key considerations (it's why we started the business). We invest significantly in testing so our customers know they are getting a top-quality product, not a cheap imitation which could let them down when it matters most.

Question three: What techniques can be employed to overcome being more expensive than a competitor, either in manufacturing costs or marketing activities?

Response: Looking at automation to manufacture more items per hour

Response: That works fine if quantity is important. What about small orders/individual bespoke items?

Response: We produce large quantities for the retail market and every penny counts

Response: We have found that our customers with smaller orders / individual bespoke projects accept price increases

Response: Positioning is one of them, since that reflects the quality of the brand. Emphasize the craftsmanship and quality components, which means value for money and durability. However, do not price yourself out of the market.

Response: Do you think many business actually use this properly?

Response: I would like to say yes, but I am sure that there is always fine tuning that can be done.

Response: No. Many have the perception that they are good but fail to communicate it to their customer base. 

Made in Britain: In terms of marketing - we mentioned this a few weeks ago - making sure you are working with an expert who can specifically target the right demographic for your business. This is especially important for PPC as you want the most bang for your buck

Response: That's an interesting point, because "cost-cutting" doesn't even have to relate to the production, it could easily relate to other functions. Working better and more effectively

Response: Indeed and cutting costs isn't always the answer - you may need to reallocate funds to different areas to see improvement

Response: Automation can help to cut costs and create more quality output from skilled resources

Response: Indeed and cutting costs isn't always the answer - you may need to reallocate funds to different areas to see improvement

Response: Understanding the customer is paramount. Know what they are buying and why. Ensure that you meet their expectations and deliver what they want. Create a company persona that is communicated through your brand and people

Response: Awareness is key. People have to know who you are, what you can offer them and what you're capable of to be able to consider you a viable option. If you can prevent an increase in prices by instead attracting new business and work then that's a much safer choice

Response: Is there an argument here for differential pricing for the same product?

Response: Personally, I think that can be a risky strategy and it would probably be worth exploring other options before looking at going down that route.

Question four: Will automation help manufacturers drive down the cost of manufacturing and also allow for economies of scale? 

Response: Yes, it has helped in our industry. 

Response: As manufacturers there are always ways to get the cost down by investing in tomorrow’s technology and replacing yesterday’s tech today! The government is currently giving incentives to companies for investing

Response: It's a fine line for some companies. Some investment would require the lines to be full 24/7 - that may work in certain sectors but not all.

Response: Yes, very true

Response: The investment into automation must be taken on a long-term basis. Machines reduce other aspects of overhead beside payroll. Making the business a vanguard in automation ahead of competitors gives clear advantage

Response: The answer should be an unequivocal 'yes' but I will equivocate! Automation isn't a magic bullet; it won't fix broken processes. Sort out processes first, ID where automation will help, then automate.

Response: Is there a question also about what level of production consider automating for - existing level, 10% more, 50% more etc?

Response: This is part of the planning stage. What opportunities to making new product can be added to the production processes. How can the company take on more work with the same automation. I have case studies from a previous life.

Response: Automation is unavoidable - whether you are first mover or follower. Temporary surplus margins will attract competition & be eroded in time. Sustainable competitive advantage [>15yr windows?] will come down to consistent savvy strategy and execution.

Join Made in Britain on Twitter at 1pm every Thursday for #madeinbritainhour. We engage with everybody, members and non-members alike (some of whom become members as a result). Hopefully, see you there.

By Made in Britain 3 weeks ago | Made in Britain news

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