Get off the cost roller coaster
Historically, FOB has not been an area of focus for manufacturers because there was minimal volatility in cost components allowing for flexibility in contract price negotiations. By maintaining margins and having goals that focus on overall cost controls to increase profit with better price management and establishment of margin thresholds – you can go beyond maintenance and increase your margins by 3-5%!
Change the way you think by moving away from unprioritized margins to reprioritized margins.
Unprioritized margins (FOB costs)
- Raw material and production cost fluctuation
- No stopgap or controls to prevent margin-averse contracts and pricing
Reprioritized margins (non-FOB costs)
- Contract pricing: pricing varies on so many levels – quantity, seasonal, price fluctuations and demand.
- Uncontrollable rising costs have forced manufacturers to better understand and control negotiated contract pricing to prevent margin erosion.
See how Kimberly Clark achieved real-time integrated contract pricing for sales orders.
