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Trading Companies’ Price Advantage Over Factories

It is true that the “pure porter trading companies” are being phased out by the times, but at the same time, there is a large number of “new trading companies” that have emerged.

They either have core technology, know the market and customer needs, or have a niche market with one of the best design capabilities ….. …etc.

For these companies, production is only an extension of their capabilities and does not play a major role. Because the focus of these companies is to help their customers add value and meet their diverse needs with differentiated solutions.

In this case, even if the cost of their products is more expensive, customers can still accept it.

But if a trading company says “our advantage is actually price, and our price is lower than many factories”, do you believe this?

The first reaction of many people is definitely disbelief.

But in fact, it is possible, for the simple reason that the cost management of many factories is problematic.

Not only some visible costs but also some invisible costs. Salary, plant, equipment, travel, marketing, etc., are the visible costs. Always fighting with the “visible costs”, but always ignoring the “invisible costs”.

What are the invisible costs?

Let’s take an actual example: a supplier wants to increase prices with us, the reason is that our newly appointed parts supplier’s offer is too high, they can not accept. In this regard, we feel very strange, according to the preliminary investigation and analysis, the supplier’s cost level is within the acceptable range, how will appear in the final offer is too high such a thing?

When asked in detail, the original supplier’s procurement officer directly to the parts factory said “the customer specified your products, quote a price”.

To be honest, I am the parts factory, this situation is certainly the price to the higher, after all, the customer has specified me, you have little choice; like this level of procurement staff, in the vast majority of factories are very common things, you can expect people like this can control the factory’s procurement costs?

Not to mention the lengthy process approval, the lack of information technology, process, and standardization led to the rise in labor costs

For many factories, due to the lack of supply chain management capabilities in procurement and supply management, production and operations management, product and logistics management, there is still a lot of room for cost reduction and speed, and this is the opportunity for trading companies.

Not to mention that the essence of some factories are just porters, outsourcing raw materials to assemble it, the generally low level of procurement, rough management level, where the cost advantage?

What about the trading companies?

And now some trading companies can use the smallest cost, the fastest speed and the lowest risk to maximize the market and customer demand to meet the program into a real product. This is the optimal configuration of the supply chain.

All competition is essentially the competition of the supply chain.

In this case, even if you are just a trading company, after adding a reasonable profit you still have to be cheaper than the factory. Goodseller is a good example.

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