Profit Shouldnt Be A Dirty Word In Material Handling

Profit Shouldnt Be A Dirty Word In Material Handling

Profit Shouldnt Be a​ Dirty Word in​ Material Handling
Nobody benefits when profit is​ eliminated from the economic equation.
With the economy on the mend, a​ lot of​ people in​ the material handling industry are expecting good times without having to​ make any changes in​ the way they do business. Unfortunately, that means the continuation of​ one particular practice that played a​ major role in​ getting the economy in​ trouble a​ few years back.
When the dot. coms were flying high, they experienced rapid growth by the simple method of​ offering impossibly low prices and constant expansion into markets about which they knew nothing. They operated at​ a​ loss for years on end, promising investors that it​ would all turn around when they had achieved sufficient market share. Eventually, of​ course, this lose a​ little on each deal but make it​ up in​ volume business model blew up in​ their faces. The balloons popped, one by one, and the economy followed them down the tube.
In the material handling industry, this discredited business model is​ still very much in​ evidence. Too many companies have played the merger game, getting themselves involved in​ markets that they know nothing about. Too many have played the numbers game, moving money from one pocket to​ another to​ make themselves look good for one more quarter this is​ called managing for stockholder value, totally forgetting about longrange planning.
Worst of​ all, too many companies have bought into the concept of​ forgoing profits in​ pursuit of​ market share, with the idea of​ becoming profitable once the competition is​ eliminated. Its called buying a​ job, meaning submitting a​ bid that allows for little or​ no profit. Theoretically, this has two benefits. it​ gets you the job, which makes your sales figures if​ not your profits look impressive. More importantly, for some people, it​ prevents your competition from getting the job.
But lets look at​ the downside. Without profits, you have no money to​ invest in​ research and development, capital expenditures, etc. Your growth is​ all on paper, and will disappear as​ soon as​ you run out of​ money to​ buy jobs with.
With minimal profit margins, you have neither the money nor the inclination to​ service the sale after it​ is​ made. The result is​ an unhappy customer, and that is​ never good news for the long term prospects of​ your company.
Finally, lets say that your strategy of​ underbidding the competition works, and your nearest competitor goes bankrupt. What happens? Somebody buys his assets for 25 cents on the dollar and opens a​ new business. Since his initial investment was so low, he can undercut your prices. You havent eliminated competition, youve made it​ worse.
Profit is​ not a​ dirty word. Nobody least of​ all the customer benefits when profit is​ eliminated from the economic equation. Im not saying we shouldnt be looking for efficiencies that will allow us to​ keep prices down while maintaining a​ reasonable profit margin. of​ course the customer benefits from lower prices, but the economy in​ general and the material handling industry in​ particular will be much healthier when we all admit to​ wanting our fair share. if​ youre satisfied with a​ 3% profit, I ​ suggest you buy a​ government bond. Its safer.

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