Association Update | Supporting our industry when supplier prices are rising.
From our members we are hearing that they are feeling the squeeze from increasing costs of materials. Not only is it just sign shops feeling the impact from this cost being passed on, but suppliers will also be feeling the same. With the obvious way to solve the problem being to pass the cost down the chain, is causing the rising supply costs which sign shops are facing and resulting in pressure on margins.
Since the pandemic broke out supply lines have been disrupted by the shutdown of many parts of the world, and freight costs have increased a great deal – up to two and a half times on what it cost a year ago! Unfortunately, inflation is the regrettable consequence of these two issues. We are all left wondering whether things will go back to “normal”, but the hard truth is, there is no sign of that just yet.
So, how do you dissolve these increasing costs when they are growing rapidly? Chances are, that if your business is being affected by the increased materials costs, so is everyone else’s and so therefore the whole industry will have to accommodate the changes.
After 2 years of trying times, we are experienced into looking at how our businesses can work smarter. So yet again, it may be a good idea to think hard into how your business can work better/smarter/faster to find where the increased materials costs can be dispersed.
The most obvious way to dissolve increased materials costs is to increase job costs. But will your customers understand that some costs must be passed on? That is the big question. Under the current climate, with many industries having to hike up prices, it is more than likely customers will already understand why it may be necessary.
Great planning for the price changes may help. From working out a new pricing structure and providing clear communication with your customers may help to ease the process.
Work with your suppliers. Are their partnerships or deals that can be made in order to keep costs as low as possible? Ask for cost breakdowns. Emphasise that your intent is not to reduce their profit, but you are trying to explore ways to reduce costs in the supply network. You may also discover areas of mutual gain, for example discounts on bulk purchasing or the amount of the down payment. Remember, the trust and credibility you build will determine the terms of your partnership.
A great way to start the year off may be to involve your team in this matter, so they can take ownership of the process. Sometimes employees have some improvement knowledge but get buried in the busy run of their jobs. Ask your team for one suggestion each on how to create an extra 30 minutes a day in their schedule. You may find areas where time is being used inefficiently for example.
Planning for the changes, smartening up current processes, clear communication to your customers, and negotiating with suppliers may be a few of the things that may help to maintain your margins even under the harsh current climate.