How to keep cost of inventory and supplies consistant

[LRC]

Hi. I was hoping someone might be able to flick a switch in my head that allows me to understand the answer to a question i've been asking myself..

How do I keep costs consistent, for customers imparticular. My logic goes as far as, buying the same amount each time I replenish stock so that the amount I buy costs the same each time (no price breaks) and the delivery costs are split among stock evenly each time, but unfortunately its never that convenient and sometime you need to buy more of one thing and sometimes non of another.

Just as an example; say I bought 100 sheets of sub paper at £25 and £5 delivery, this would be 30p a sheet. But then I knew I needed 200 sheets for an order - £50 and £5 delivery, this would be 27p a sheet; Its a basic example and only involves 1 type of item but its just to help explain what I'm trying to figure out.

Hopefully this makes sense??

[pisquee]

Price for the most likely worst case scenario, using mugs as an example...

If you normally buy a box of 36 mugs at a time, then this is your unit cost for mugs (with the shipping factored in) ... if you get some bigger orders and need to buy 2 or 3 boxes, then it just means your margins are better and you get a better profit on those orders.

So, factor in the price breaks of your usual buying patterns ... if you get busier, you make more profit

There will always be the rare occasion when you just need one mug to finish an order, and your cashflow isn't good, so you can't buy a full box, and in those circumstances you just have to suck it up and buy in the one mug, and have less profit on that order.

[LRC]

Yeah this makes sense. So for pricing a job, go with cost of supplies before any price break?

What about the cost of delivery for replenishing stock? For e.g. 50 mugs - the cost can be absorbed by splitting among the mugs (delivery cost divided by 50). In the case of 1 mug, i couldn't pass on the full delivery cost to the customer.

[cyprian.costelloe]

You base all your costs on the worst possible case.

Sent from my K10 using Tapatalk

[pisquee]

No in the case of having to buy just one mug in , you have to absorb the additional costs, and make less profit on that job.

[pisquee]

Or, you price so that you can still make a profit if you have to outsource the job

[Leadbelly]

I have this costing dilemma all the time especially as some of the media rolls I have to buy cost hundreds and for each printable roll I have to purchase a matching laminate which is more expensive than the printable media. Then to add too that I have to have sheet material in stock to mount the said prints onto.

The way I work it is the same as your box of mugs / pack of paper / heat-press / time and labour and I divide the total cost based on how many units I can get from the group purchase. I have to agree being a small business once you have your single unit price you have to stick too it and I feel the reason being I might get an order from as customer for 5 standard sized signs maybe followed by 1 sign a few months later. The same week I might get a call from someone they have passed my name too for 20 / 25 signs this order suddenly becomes the cream, so based on this I stick to the same price per unit even when it lands as a single unit order at the same time I have to layout for new stock, swings and roundabouts.

As with all small business's we rob Peter to pay Paul / micro-manage / and in our case cash-flow can be a real problem as most signage is business to business and we have to wait for our money, but have to pay for stock up-front.

The reason we have decided to start dye-sub is to help with cash-flow as we can sell more to the public and get paid on the spot for their purchase.

LB

[GoonerGary]

If I've understood you correctly, you are trying to manage short term cash flow and profit? Socialgiraffe gave some good advice a while back. You don't necessarily have to price out every single item, but look at it as a whole job.

So you buy your 100m of material etc, then work out your total cost for one single item. Then you decide how much profit you are prepared to accept on top of your total costs. So you make £3 profit from a single item to Joe Bloggs who walks in off the street. Big customer comes along and wants 100 items. Are you going to charge £3 x 100 = £300 to that big customer, or are you prepared to accept £100 profit that day instead? You'll stay in business if you accept the £100.