Q. How have you integrated the increased costs of raw materials and energy into the pricing for your customers?
We are a franchise business. Our pricing to our dealers has not changed because of the new plant. In fact, our pricing has been very consistent over the past five to seven years. While there are huge efficiencies that we will gain in years to come, the immediate impact has not affected our prices. Part of the overall goal in building this facility was not a defensive move, but rather an attempt to get out in front and insulate our customers from potential price increases. At the time, it was more the thinking that healthcare costs were going to grow out of control, but so far whether it's been raw materials, or energy, we've been able to insulate our customers from cost-related increases.
It's interesting to note that prior to 2002, the primary growth engine for our company was sending out more envelopes. Rather than 10 times a year, the goal would be 12 times a year, which our production processes handled quite well. However, since the early 2000s, our growth engine for the company shifted to more of a let's put more pieces in the envelopes that we do send out. That allowed us to take advantage of 'free space' in the envelope without significantly increasing (postal) costs. The problem was the manufacturing processes we were using began to break down as we pushed 40 to 50 pieces in the envelope. It didn't work and we became more and more inefficient as we added more pieces to the envelope. A big driver for the new plant was determining how to add more pieces to the envelope without growing costs (adding a huge head count) significantly.