Since this place seems like it caters to mostly job shop environments, I have a question.
Does anyone here use the 8020 principle for their business?
I'm in a corporate environment where we have divisions and facilities that do high production (all pretty much are overseas) but through numerous acquisitions over the past few decades, our facility has become the catch-all for a lot of onsie-twosie products. We're literally a job shop where if a customer can't get a stock product of ours, they can have one custom made by either having a redesign/mod to something existing to literally a custom made product.
Well, the way this company is structured, our facility has zero ability to control our designs, investments, budgeting/capital, BOMs, costing, some sourcing, etc. Most of it is controlled elsewhere. All we can do is build what we're given. Therefore, it makes it extremely difficult to make adjustments and countermeasures quickly and efficiently. Everything has to go through the bureaucracy gauntlet. Most of the time, we're selling custom made products below cost, even negative while a few high-dollar accounts bring us back into the black (but barely). The real problem is the "higher ups" don't seem like they want to capture all of our costs. I guess it's to help keep the cost of the product low so we can still be "competitive" and not lose accounts. Since we're changing over setups, materials, etc. (like a job shop), they feel like we only need to only capture direct (like a high production facility) while we hemorrhage in indirect. New CEO exclaimed he wants 35% GP. Being a job shop, shouldn't that be achievable? The other thing is, while we're in last place in the market, we're the only company/facility that has this ability to custom make the product with relative volume. Our competitors have gone to a mod shop idea where they have the stock products made overseas then it comes to a domestic facility where it has the ability to be modified to the customers liking (but with some limitations).
Well, to help fix this, the highers feel like 8020 would be a good practice to implement where they want to ditch 80% of our lower paying customers (supposedly 20M in sales).
Seems counterintuitive to me if we're losing money because we're not capturing costs appropriately, voluntarily getting rid of customers is the way to become profitable? If you can imagine the numbers (and this is a rough example), a stock product might cost $500. We're selling a custom product for $600 but if you capture everything that goes into it, you can imagine it actually costing $1500. Then 8020 wouldn't be necessary, right? Because either the customer will pay and we actually make money or the customer will pass and we won't lose nearly as much if we were to continue the job.
I honestly don't get it but these guys have the MBAs so that means they know how to run a business, right?
Does anyone here use the 8020 principle for their business?
I'm in a corporate environment where we have divisions and facilities that do high production (all pretty much are overseas) but through numerous acquisitions over the past few decades, our facility has become the catch-all for a lot of onsie-twosie products. We're literally a job shop where if a customer can't get a stock product of ours, they can have one custom made by either having a redesign/mod to something existing to literally a custom made product.
Well, the way this company is structured, our facility has zero ability to control our designs, investments, budgeting/capital, BOMs, costing, some sourcing, etc. Most of it is controlled elsewhere. All we can do is build what we're given. Therefore, it makes it extremely difficult to make adjustments and countermeasures quickly and efficiently. Everything has to go through the bureaucracy gauntlet. Most of the time, we're selling custom made products below cost, even negative while a few high-dollar accounts bring us back into the black (but barely). The real problem is the "higher ups" don't seem like they want to capture all of our costs. I guess it's to help keep the cost of the product low so we can still be "competitive" and not lose accounts. Since we're changing over setups, materials, etc. (like a job shop), they feel like we only need to only capture direct (like a high production facility) while we hemorrhage in indirect. New CEO exclaimed he wants 35% GP. Being a job shop, shouldn't that be achievable? The other thing is, while we're in last place in the market, we're the only company/facility that has this ability to custom make the product with relative volume. Our competitors have gone to a mod shop idea where they have the stock products made overseas then it comes to a domestic facility where it has the ability to be modified to the customers liking (but with some limitations).
Well, to help fix this, the highers feel like 8020 would be a good practice to implement where they want to ditch 80% of our lower paying customers (supposedly 20M in sales).
Seems counterintuitive to me if we're losing money because we're not capturing costs appropriately, voluntarily getting rid of customers is the way to become profitable? If you can imagine the numbers (and this is a rough example), a stock product might cost $500. We're selling a custom product for $600 but if you capture everything that goes into it, you can imagine it actually costing $1500. Then 8020 wouldn't be necessary, right? Because either the customer will pay and we actually make money or the customer will pass and we won't lose nearly as much if we were to continue the job.
I honestly don't get it but these guys have the MBAs so that means they know how to run a business, right?
.... Nobody has brought this silliness up yet. Oh, i make my own coffee, change my own oil, and carry my own bags too.