Product pricing through entire supply chain.

[BGARK]

Anyone here experienced in product pricing through an entire supply chain.

Manufacture, Distribution, Wholesale, Retail.

Taking a simple example like a decorative item sold by ~ John Lewis at £30.

At each stage in the process I need to know what the expected margins are, I am about to price up a job for a huge client and don't want to sound like a muppet.

My usual business is low volume but very high margin but now have an opportunity for the opposite if I get it right.

By the way I am at the manufacturing end.

Thanks!

Edited by BGARK on Monday 4th January 19:55

[tumble dryer]

BGARK said:

Anyone here experienced in product pricing through an entire supply chain.

Manufacture, Distribution, Wholesale, Retail.

Taking a simple example like a decorative sofa cushion that is sold by ~ John Lewis at £20.

At each stage in the process I need to know what the expected margins are, I am about to price up a job for a huge client and don't want to sound like a muppet.

My usual business is low volume but very high margin but now have an opportunity for the opposite if I get it right.

By the way I am at the manufacturing end.

Thanks!

Careful. (but you know this)

Been there before in a previous business life and found myself completely outside my comfort zone.

How replicable is your business/product/service? The big players take a long time to establish any relationship that's worthwhile (to you) but will drop you for a few pence if another/better comes along.

[Charlie1986]

We have products in the uk and we sell direct to dealers and end users

We have margins off 40-100% from production and then it varies on the customer on volumes

But a quick google one of our parts that cost us £7.00 to produce with a selling price of £13.00 direct to customer is currently going for £33.00 from a dealer who pay £14.00.

We also have some margins as low as 10% but then there taking 250K of our parts a year.

Some customers will also drop you for as little as 10p per unit.

[BGARK]

A basic ratio was suggested today that a colleague of mine used in the past. Only used as a guideline to start internal conversation, and clearly volumes would make a difference.

If the item in question was retailed for £30 inc VAT. So example:

£30 RRP

£18.75 Distributor

£11.72 Manufacturer.

Basically dividing each price down from retail by 1.6.

[DSLiverpool]

Your being too simplistic, from the manufacturer price that's the price you are happy to sell at each level will expect a quantity, marketing, loyalty or handling rebate (discount)

So the distributor price must have enough fat for the inevitable "what if we" conversation, the retailer will ask for help from the disty who will ask you for the £ to run a promotion etc.

Ask your customer if the volume may grow, what if it declines ?

Food for thought

[AlanQ]

As said above, whilst margin is important the buyer will look at other factors as well. If you the manufacturer are spending a lot of money on promotion and creating the demand the buyer will usually be OK with a lower margin, if you expect them to promote the product they will want more margin to cover that. Also how you deal with any warranty claims and customer returns can make a difference. And make sure you ask about payment terms. The larger the customer the slower they seem to want to pay, so if they drop a big order on you and you have to front it for 90 days make sure you've factored it in somewhere.