Monday, March 03, 2003

Price Pressure

Another common theme in talking with lots of folks last week at the NFBA trade show was price pressure.

Nothing really new here and it sure gets old. The pressure comes from rising input prices and a refusal of customers to accept higher prices. This is evidenced at each step of the supply chain and in each of multiple chains.

Oil prices go up, which affects fuels, which affects the transportation of goods. In an industry where most of our supplies are physically large and heavy (wood and steel), it is a huge impact. Further, industries which use petroleum-based inputs (like paint and insulation) see further price increases on their base materials. Most employees want to see wage increases. Health care prices won't quit rising.

The situation can seem helpless without a framework for a relief valve.

The handful of folks who are adopting a Lean philosophy seemed far less concerned than those who didn't or wouldn't. Lean is all about the tools to find and then eliminate waste, those activities which add no value to the product in the eyes of the the customer. Price pressure, for those pursuing Lean, is merely the impetus to find more waste to cut out. Price pressure, for those not pursuing a lean strategy, feels like a noose. It is genuinely frightening.

This is why a framework for understanding is so crucial. It is not a purely theoretical discussion. It can mean survival.

I hope this is helpful.

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