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Very Profitable Manufacturing: How to Quadruple Your Manufacturing Profits in 90 Days or Less
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Very Profitable Manufacturing: How to Quadruple Your Manufacturing Profits in 90 Days or Less
By Andrei Kossyrine
© Xpress Software Inc. - All Rights reserved
http://www.xssoftware.com
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Making manufacturing more profitable is not a "one size fits all" solution. This change in thinking and operations is also not accomplished in a single step or procedure change. The following is one of a series of topics designed to enhance the profitability of manufacturing in general.
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Manufacturers can make a huge variety of custom products AND multiply their profits with a new way of custom product design and order processing.
You know how manufacturing is today. Increasingly, North America is losing out to lower wage facilities overseas - Mexico, Taiwan, Malaysia, China, India and many others are hungry for US dollars.
So how can you keep customers buying from you and staying away from cheaper alternatives? How can you keep profit margins from eroding?
The answer is unlimited custom options. From sizes to colors, from fabrics to finishes, from improved designs to option bundles and packages, adding many custom options to your product or service offerings gives customers choices they never experienced.
Your customers will pay 10, 15, 25, even 100+ percent more for a specially tailored product or service. And these satisfied customers will return again and again because you are the only one who creates their special product.
Just look at a few success stories:
Global Corporation, a premier office furniture manufacturer, charges 15 percent more for a custom-size desk and another 10 to 25 percent for upscale colors and finishes.
Land's End, a direct clothing merchant with $1.7 billion in sales in 2002, pocketed $299 million in online orders that year, 40 percent of that came from custom orders. Custom jeans are $54 versus $29.50 for standard ones. This 83.1 percent price increase brought four times the business that Land's End projected when it introduced several custom clothing lines.
At Nike's web site, you can customize your own shoes. You can even have your name embroidered on the back of each sneaker. Or at NikeID you can design your own shoe or a sport bag, using thousands of combinations of colors, graphics, logos and materials.
Today, a Ford Explorer can be ordered more than 2.5 million different ways. A Steelcase office desk has more than 1.2 million variations, and a single series of SMC compact cylinders can be configured in more than a million ways. Premiums are charged for many of these additional options, boosting each company's profit margin.
Companies that allow customers to quickly and accurately choose custom products earn customer loyalty and learn more about their customers' preferences.
An average manufacturing company today experiences a 5 to 10 percent profit margin. Adding a 10 to 25 percent premium for a custom product without raising your manufacturing costs will double, triple or quadruple your profits right away.
But is it that simple, you may think. What about all the money necessary to spec, quote, create custom drawings, make and monitor customized products?
It is that simple. Change your Bill of Materials (BOM) and ordering system to accommodate special product manufacturing in a standard way.
Picture this. Instead of needing millions of new product combinations (SKUs) in your system, a dynamic BOM automatically makes all the necessary documents on the fly based on the customer order.
From the supplied information (colors, sizes, etc.) the system automatically creates design and production drawings, custom BOM, requests for purchasing, job lists, shop floor tickets, CNC programs, adjust inventory levels and charge your clients the 10, 15, 25+ percent premium.
Better yet, your labor costs stay the same as there's no need to manually create all that paperwork for every custom product.
Now you can provide clients with unlimited choices as long as they pay for it. So introducing new colors, shapes, sizes, packaging, etc. makes you more money!
As a stand out from the "standard product only" crowd, your company's profits will go through the roof.
The name of this game is Mass Customization. Companies like Procter & Gamble, Lego, Nike, Adidas, Land's End, BMW, or Levi Strauss have started large-scale mass customization programs. It is a true wave of tomorrow's manufacturing.
And you can implement this simple change in your manufacturing process in as little as 90 days, or even less!
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Since 1996 Xpress Software Inc. has provided
technical assistance in lean manufacturing methods,
computer systems and business process automation
to maximize manufacturing profits.
Visit its website www.xssoftware.com or contact
Andrei Kossyrine at andrei@xssoftware.com.
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