Give more to receive more

7 April 2011

Do you ask customers to pay up or do you play roulette with the future of your company? Some suppliers are finding it a losing battle to protect customers from rising prices. Trying to play the good guy is a contributory factor in a fall in gross margins for one in three in the paper and board sector in the UK, according to the latest Plimsoll Industry Analysis. This amounts to 339 firms whose profitability has moved in the wrong direction in the past year; and for 189 of them this is the second successive year of seeing profits fall away.

Only by setting prices that are sustainable does a business give itself a fighting chance of surviving. Sustainable strategies must have an element of self-interest.

Changes simply have to happen to move with the times. Robert Horne Group, which supplies materials from paper and board to plastics, has had something of a makeover in the past 18 months, led by the incoming Managing Director, Paul French (see this month's Big Interview). He has ‘re-energised’ the business to face the challenges, he says, ‘rather than bury our heads in the sand and expect adverse trading conditions to go away’. Boldly, he has looked at new directions for the business: “Industry has been going through a period of great change, with difficult times for the paper market, where there has been a decline in consumption in conjunction with price increases.”

Iggesund Paperboard has just reported a decision to invest strongly to ‘completely eliminate all fossil carbon emissions’ from the company’s paperboard mill at Workington, UK. A total of £108 million will be spent to switch the whole mill’s energy supply from fossil natural gas to biofuels.

Back in October 2010 we reported that Iggesund was investing in a new recovery boiler at its mill at Iggesund, Sweden. As a result, production there was to be biofuel driven and eventually self-sufficient in electricity. This latest investment at Workington mirrors the approach at its UK plant. The ability to stand on its own two feet in this way, will save Iggesund from being at the mercy of variable and unpredictable prices set by energy suppliers.

If it is not sustainable to give away profits to retain customers by suppressing necessary price rises, how else can a machinery supplier keep them or win them away from competitors? Great service, that’s how. As competitive pressure grows, customers want after-sales care that keeps their machines running for longer and with fewer breakdowns, and expect problems to be solved quickly and economically.

Remote diagnostics is nothing new, but it is reaching ever-greater levels of sophistication and user friendliness, as our Customer Service feature this issue explains. Manroland Great Britain’s after-care contracts range from ‘basic’ to ‘supreme’, which it says has brought considerable confidence to the market. In this case, a customer with a problem emails the details, to which an engineer electronically visits the customer via the webcam installed in the machine and gives a diagnosis on-line. A ‘flesh and blood’ engineer can then come on site if necessary.

A nifty use of a smart phone to simulate the action and benefits of safety control functions, was recently displayed by Rockwell Automation at the launch of its Guardmaster safety relay product range. Rockwell literally has put the training of the new system in the hands of the person holding the phone, and makes it universally accessible through the common language of interactive animated graphics.

Some ways of aiming to boost immunity to profit erosion in difficult times can seem contrary to intuition: giving more to customers in service and giving back to the company more in terms of investment, are just two.

Joanne Hunter,

Deputy Editor

Joanne Hunter

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