Issue link: https://www.e-digitaleditions.com/i/276079
40 FEDA News & Views The difference is material. The material matters in material handling Still stuck on metal or wood? Get more value out of your containers with composite products from MFG Tray. Composite construction ensures exceptional strength, stability and temperature compatibility. Choose from a full line in a variety of sizes. Including dough boxes. Pan extenders. Bagel boards. Display and cafeteria trays. And prep and storage containers. Contact your local distributor, call (800) 458-6050 or visit www.mfgtray.com. CHOOSE COMPOSITES be a supplier to every customer in each segment, we decided, because each of them wanted to become the leader in its respective downstream segment. Customer competition was extremely intense, so we decided to pick a few leading players in each downstream segment and nurture them into market leaders. These customers needed to buy more than 70 percent of their steel requirement from Southern Steel in order for us to "re-synchronize" our products with their production equipment, thus giving them the great benefits of higher productivity. And once this transition was made, the 30 percent supplied by our competitors would have an inferior value proposition. To enhance this mutually beneficial relationship and generate more sales, we supplied them with very competitive prices for their export requirement, which filled up their surplus capacity. Meanwhile, our competitors offered price discounts to their customers in the nail segment to disrupt our dominance. At that time, nail customers used 0.12 carbon- killed steel as their raw material, priced at RM1200/metric ton. (Killed steel is a lower grade of steel, which has a lower drawability than rimmed steel.) Our competitors offered our customers 0.08 carbon rimmed steel at RM1250/metric ton instead of the usual RM1300/metric ton, which was a big discount. However, we understood the following issues: At RM1250/metric ton on wire rod, produced from imported raw material, the competitors barely made a profit (Malaysian steel mills could only produce killed steel, while rimmed steel is imported). Secondly, the 0.08 carbon rimmed steel is good for drawability, but being a much softer steel, it is not suitable for the whole range of nails. Instead of responding by simply following this value- destroying price war, we shifted the basis for the competition by creating a new product of 0.10 carbon killed steel, and sold it to our customers at a price of RM1230/metric ton. This better met our customers' needs at a lower cost, and our competitors could not follow us. In essence, we made more profit from these products, and customers also saved more cost! Eventually, through our "supply chain versus supply chain," most customers bought more than 90 percent of their raw material requirements from us. Best regards, Tenglum Low Pricing War continued The material matters in material handling The material matters in material handling The material matters in material handling The material matters in material handling The moral of the story: The best way to win a price war is not to have one. By turning it into a value war, you will take the best part of the market, while your price-oriented competitors will not know what happened to them.