If you watch commercials with any interest at all, you’ll soon notice an absence of “Where’s The Beef?” spots from fast food chains. Perhaps the ads will tout the taste, convenience or even health benefits of non-beef choices. But mark my words; they going to attempt to influence you to abandon burgers for chicken tenders, ribs or sandwiches. The reason? Ground beef prices have risen by double-digit percentages since last year.
As a business leader you may also have some convincing to do. For example, healthcare costs were soaring even before healthcare reform and the true cost businesses like yours will bear remains to be seen. So, like the hamburger maker, the cost of at least one of your inputs is out of control. You’ve got to convince your employees or customers to do something differently if you are to remain profitable.
Input Price Management
Here is an input price management checklist:
1) List the various component parts of each of your company’s processes: Research and Development, Production, Sales, Service, Administration.
2) Now ask these questions about each component on that list: “What has changed about this input? If prices have risen, is this a temporary situation or a permanent one? What can be done to reduce this cost?”
3) If you have identified ways to rein in the costs or to hedge against future cost increases, move today, not tomorrow, to put those plans in place.
4) However, if you think the cost increases are likely permanent (like healthcare costs in my example) step backward in the process to figure out what decisions are being made by customers, employees or other stakeholders. For instance, Burger King knows that people are ordering Whoppers and that the cost of providing Whoppers is going up because of beef prices. Burger King can either try to raise Whopper prices (hard to do) or convince customers to order fish instead.
5) Brainstorm with your colleagues to find attractive alternatives you can promote. Use creativity and a variety of appeals to convince people to make choices that will be both pleasing to them and profitable for you.
Business owners know that you’ve got to watch input prices like a hawk. But when the price increases are permanent, watching them isn’t enough. To succeed you must throw the weight of your influence behind new patterns of behavior. Today’s lunch choice? Not beef.
—————————————————————————————————————-
Jean Houston Shore works with organizations that want their people to work together better. She can be reached at 770-643-9724, by email at jean@thinkbusiness.com or through her website at www.working-together-better.com. Ask for your free copy of her book Working Together Better.
Copyright © 2010, Jean Houston Shore, Business Resource Group. All Rights Reserved Internationally. No portion may be reprinted or used without prior written permission.
