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Readers Weighing In — Dickeson

June 2006
WITH REVERSE auctions, printers are starving themselves based on hourly rates and production speeds. In order to keep up you must buy the newest equipment and pass the running speed savings on to the customer. Where does the money come from for future investments?” asks one writer. He goes on to say, “We have been using market pricing technology for 30 years with great success. Not leaving money on the table has been our secret. Not easy to calculate...”

This is the comment from one respondent. I received well over 100 e-mail responses to my March issue article titled “Am I Wrong Here?” Most of them were requests for copies of “Monday Morning Manager,” a PDF e-book that I offer free of charge. But several contained comments I think you’ll find of considerable interest.

Another writer said, “...We are with you all the way regarding capacity utilization and cycle time reduction as the path to profitability. The nice thing about this is that one of the most important client demands is: ‘how fast can you do it?’...That said, we still do our pricing with a traditional budgeted-hourly-rates (BHR) approach. The reason is simple; that is the best way for us to predict where our competitor’s price will be. Once we know where they are, we can use PVA factors to make smarter pricing decisions than they do...The point is that as long as the rest of the world hasn’t yet changed their thinking, then we need to look at pricing both ways.”

Still another noted, “...We’ve been losing commercial jobs at or below our prime cost, and that upsets us and leave some presses idle for weeks. We believe that our competitors don’t have a clue on covering their fixed costs or even how to reach break even point, or perhaps it is us.”

Deepening Discounts

For a refreshing view, this printer wrote, “...We stopped using budgeted hourly rates to set pricing five years ago. Well, sort of. Our custom-developed estimating system is built around BHR, like I’m sure every estimating system is. We just stopped updating the BHRs. May 2000 is the last time our accounting department invested into updating them. That was the beginning of the downturn in our industry...and we concluded that it made no sense to spend the time to update the system, just to have the estimators deepen the discount needed to meet the market. Over the years, the estimators have continued to use the system because that is all they know. They have had to learn to calibrate the selling against the competition.
 

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