You can't afford to skimp on materials, but what if you don't have the supplies you need? Read on to find out how you can get through the next few months of rising prices and supply shortages.
Prepare for price increases
Many industries are experiencing supply chain shortages, but another major issue affecting supplies is rising prices. A number of major events in the past year have contributed to this, besides the most obvious one – the pandemic. There have been container shortages, a container ship getting stuck in the Suez Canal, and factory fires, among other things. Industries are beginning to rebound from this, but it will take awhile.
In the meantime, expect to continue to see rising prices on raw materials in many industries and plan accordingly.
Follow these steps outlined by Graphics Pro to prepare your business for higher prices and supply shortages:
- Calculate your ASP (Average Selling Price) for your goods and services. ASP, according to Investopedia, "refers to the price at which a certain class of good or service is typically sold." To calculate the ASP, take the total revenue earned from a specific product, and divide that by the number of units sold.
- Next, calculate the quantity of the products and raw material you need at ASP to meet your budget for the year.
- Calculate the number of sales needed at the ASP to cover your payroll and employee compensation for the year.
- And finally, consider your supplier's typical lead time.
- Add 10-15% as a buffer.
Make sure you have enough supply
Work with your supplier to make sure your business has enough stock to keep you going. You can't sell what you don't have. Speak to your sales rep to plan ahead and make sure you have enough stock to carry you at least though the end of the year.
Kelly David, Marketing Manager at Kieffer-Starlite, discusses this on Sign Builder Illustrated. She suggests reviewing all of your upcoming orders even if they aren't confirmed yet, prioritizing your most critical materials, and communicating with your customers that their materials need to be confirmed and the turnaround time will probably be longer than usual. Most customers will be understanding, as everyone is aware of what's been going on in the world.
Finally, schedule a call with your supplier. Here at S&F our sales team can discuss any shortages we are experiencing so you can be upfront with your customers and help them be prepared.
Work with your supplier on substitutions
After all is said and done, we will do our best to make sure you have the materials you need. And if we cannot make that happen, we will recommend the best materials for substitution. This could be a different brand than you're used to since some major brands are experiencing shortages, or another material altogether. We will only suggest something we know will work for you.
With a little tightening up and a lot of planning ahead, we will continue to get through this!
Conclusion
The main thing you can do to help your business ride out the continued price increases and material shortages is to plan ahead. Give your budget a buffer and work with us to plan your inventory needs for the next few months. Communicate with your customers about the changes they can expect, and reassure them that you are doing everything you can to meet their needs. And lastly, consider substitutions for products that are becoming increasingly hard to find. You never know, you might surprise yourself and find a new niche, or discover that a substitution is now your favorite product.
As always, know that we are here supporting you and we will address all your concerns as best we can.
Have any questions? Give us a call at 718-399-3333 or email us at [email protected]. We're here to help!
At S&F News, our mission is to keep you informed on the latest industry trends and tips. Check back often for updates.