Quick Tip: Supply and Demand
Finding Equilibrium Between Supply and Demand
How can we measure and track supply and demand? More importantly, how do we find equilibrium between the two? Let’s start simple. Envision your company’s demand as the number of purchase orders you receive. This is the quantity consumers are willing to buy of your product based on its price point. For example, let’s assume a customer is willing to buy 20 chair legs at the price of $10 each. Now, let’s consider supply. Without getting into the nitty-gritty of economics, supply is simply the amount of product you are willing to supply to the market based on a certain price you will be receiving from selling that product.
For example, you’re willing to produce 40 chair legs at $10 per leg; however, your customer is only willing to buy 20 at a price of $10 per leg. Now we can talk about equilibrium. What’s the problem here? Your customer feels that the price is too high, lowering the number of chair legs they’re willing to purchase. If neither party is willing to budge (because your overhead is too high, or your customer cannot afford to pay more), then an equilibrium will not be reached.
Does this sound like you?
Your prices are higher due to a lack of efficiency in your production process.
Too many hours are spent manually estimating jobs and searching through inventory instead of completing production.
Machines are not working as efficiently as they should because there is too much idle time between jobs.
To drive down production costs, it’s important to increase efficiency. An ERP system, like MIE Trak Pro, allows manufacturers to automate processes that take too much time when performed manually. Automating processes – like estimating, quoting, and job tracking using MIE Trak Pro – saves both time and money. After increasing your efficiency, you will be able to produce more chair legs at a lower cost; this allows you to price your chair legs more competitively. This way, you can meet your customer’s demand and you can make a profit!