Issue link: https://read.dmtmag.com/i/588129
WORLD FENCE NEWS • NOVEMBER 2015 • 31 for truckload sales and bundle sales at the same level. Manufacturers should focus more on things such as improv- ing quality, increasing production ef- ficiency, enhancing the brand equity and investing resources in new prod- uct development," he said. "Distribu- tors, on the other hand, should focus on providing best distribution service to the contractors and so forth. Each player has different roles in the value chain and I believe that when we have deeper mutual respect, our industry will get healthier overall." Kobe has a great point. Everyone wants the cheapest price; we all know the residential customer, for example, who is never happy, gets 10 estimates and is still trying to squeeze every nickel from the contractor. Subsequently, the general con- tractor who reviews 20 bid applica- tions looking for the lowest number, and finally the fence contractor is al- ways looking for the best price from the vendor, and on and on it goes. The focus needs to change from all about pricing to the value of what we can bring to the table and make the best of that, up the supply chain and down. Finding and nurturing niche markets and focusing on the "margin oriented" portions of the business, as Paul referred to earlier, are key strate- gies for success in a very competitive fence industry. Kobe also added this on pricing: "To some of the fencing contractors, pricing became the major factor when looking for a supplier. I won't say it's always a bad thing, but from the sup- plier standpoint, it is getting tougher because we have to fight on prices for every order, and eventually it drags down the market price. "Then, to ser- vice those busi- nesses profitably, distributors need to lower their cost. And that would mean less headcounts to operate, less number of trucks and less amount of inventory. Soon our customer service level would start to deteriorate. Instead of making daily deliveries, now we can probably make only twice a week deliveries. "Some distributors will start to look for the lowest cost manufac- turers instead of looking for quality products. And, furthermore, when the lower price seems to bring benefit to the fence contractors who negotiated the deal, it actually does not. Once one contractor gets a low price, in a couple of days all their peers' prices go down as well. So it is sometimes counterproductive to shop around for lower prices. Industry needs to com- pete more for bet- ter service and quality and less on the prices," he said. Unless and un- til there is any con- solidation of sup- pliers in the fence industry and more stability in pricing, and for that matter whether there is price stability or not, the focus needs to be on quality and service, not so much on pinching pennies; and we need to pass through the true value of what the fence con- tractor is selling to the end user. I also agree with Kobe that tier pricing is necessary and fair, but only to those who qualify. Deeper discounts should be re- served for customers who purchase large amounts. Almost without ex- ception, the multi-million dollar pur- chasers have a much higher overhead factor and need the discounts to oper- ate fairly with the smaller players who can run leaner. And this policy needs to be strict- ly adhered to. If every vendor followed a fair and equitable discount policy, much of the penny pinching and nickel and dime purchasing strategies would dissipate and pricing would become more stable and profitable for all. That being said, do we indeed have too much capacity in this in- dustry? Possibly. Time will tell, and markets always have ways to correct themselves, albeit sometimes in a very painful way. If there is a consolidation of ca- pacity in the future of our industry, i.e., the mergers or acquisitions or exit- ing the market of some major vendors, prices may go up slightly because of reduced supply and possibly the new entities that emerged would be able to streamline, cut costs and everyone may be able to make more money. But it is not always that easy, nor is it a guarantee of success. We will see what happens. Also any price increases would have to be pushed through to the end user, who I think may be the big winner in today's market, taking continued on page 76 Unless and until there is any consolidation of suppliers in the fence industry and more stability in pricing, and for that matter whether there is price stability or not, the focus needs to be on quality and service, not so much on pinching pennies; and we need to pass through the true value of what the fence contractor is selling to the end user.