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If Global raw material market is constantly variable you can keep selling price stabile mostly only on a short term period by decreasing other input costs that affect the price or managing bigger stock of raw materials when the supply price is suitable, or manipulating with productivity performances, but all those issues must not affect the QUALITy!. Actually those decisions are a matter of complex analysis...of a supply of raw material , analyses of demand, of a competition , analyses of internal performances and other factors... If you could anticipate that trend of a fluctuation on raw material market will stop and turns in to stability , in that case, staying on your products on certain market is important you could also deal with smaller margin ratio on a short term if you don't want to loss customers and market decisions. As I said, those decisions depends of a complex analyses.
Sir , trying in front of seniors & experienced people of marketing & sales all over .
Why Not it could be done . Take a +/- component ratio & calculate the selling price ( +/- will cover the possible +'s & possible -'s - average out & then give the selling price ) .
There are n number of examples where products could be said where RM fluctuates but selling price is fixed with their customers .
Fix the selling price carefully.
It require a careful study of the volatility and its reasons for the price change of raw-materials from time to time. Any upward revision in the price should be realistic and acceptable to the market by genuine reasons. Adjust the manufacturing capacities in a scientific manner giving due weight-age to what factors of production is scarce and what is plenty--wisely use the appropriate mix.
(Just for example: At present in TN we get12 -15 KG of tomato for just 1$ whereas in certain seasons even we cannot get1 KG for1$. I could always find a stable price for the Tomato Sauce...revisions once in a while)......the example is just to explain my efforts to answer by its logic.
GOOD QUESTION SIR,,,, IT IS THE FACT YOU HAVE TO KEEP IN MIND BEFORE DOING ANYTHING ,,, PRICING & CAREFUL PRICING IS THE ANSWER OF THIS HAZARD ............ GOOD DAY
The selling price can be kept stable even if the market price of raw materials is volatile under following conditions:
1. If the raw material content in the cost of goods sold is small.
2. Government subsidy is available for volatility of raw material prices
3. If the raw material prices are stable in a particular currency, and the sale price of final goods is denominated in the same currency.
If price of raw material is going up, you can keep the selling price stable (to a limit) by
- reducing other production costs
- Outsourcing
- Make use of volume discounts, either alone or through partnering with other players in the market.
- Increasing sales volumes
Apply the basic rule. Economies of Scale - production on a wide range.
if this is costly, reduce your production cost, Sometimes outsourcing is expensive, try to do it yourself.
Waste must not be wasted but utilized.
