Trust but Verify

I talked to a woman on a plane a few weeks ago; not unusual. She talked about how ineffective many of the HR training programs are in improving performance; again nothing unusual. Her post-doctorate work in this area revealed that people operate with self-imposed constraints limiting their performance and potential; very unusual. These constraints can be eliminated, increasing productivity and potential; very cool. It’s unfortunate that when people work for companies, they bring these constraints to work. If the self-imposed constraint argument is true, then are we letting our offshore manufacturing friends have an easy win? Many articles have been written...

Author: Category: Component Pricing, Cost, Product CostComments: 0Post Date: January 13, 2011

Values Up or Prices Down

The Internet, enabled by cool applications, has brought the process of competitive bidding to an entirely new level. Reverse auctions, for example, have squeezed savings out of suppliers in every situation I am aware of. But it’s getting worse for suppliers. Some companies are using bidding to gauge a supplier's competitiveness. That may be clever and effective for component buyers, but it is tough on suppliers. Two-step bidding may not be new, but using the Internet changes it significantly. I have written before about the need for companies to be the low-cost producers in the market spaces they choose to be...

Author: Category: Component Pricing, Corporate, Cost, StrategyComments: 0Post Date: December 2, 2010

Eventually, It All Boils Down to Cost

We should be grateful that accountants invented the concept of gross margin. The simple formula -- revenue minus cost divided by revenue -- really becomes valuable once we get past the arithmetic and view it as the extra value seen by a customer over a product's manufacturing cost. This extra value can be a result of superior technology or service or lower costs of manufacturing from better business processes or procurement. Customers determine price. Their buying decisions set the price and assess this value. However, shareholders set the gross margin. Those who buy or hold stocks bias a company’s valuation through...

Author: Category: Component Pricing, CostComments: 0Post Date: November 22, 2010