Industrial Grinders

Van,

As we discussed prior to this email the issue of Industrial Grinders manufacturing process is of dire importance. The issue of what to do with our special steel supply, and back stocked inventories has been under serious scrutiny by everyone involved in our manufacturing process. Our excess steel supply is an asset that we simply cannot afford to throw away and take a major loss. Our total book value of inventories exceed $93,000. Figuring out what to do with this is priority number one, and I have an option. Our special steel cost the plant $26,400, switching immediately to only plastic rings will not only allow for extremely minimal uses of our inventories on hand but as well as zero potential for the uses of our special steel. My common ground approach incorporates both establishing norms for our production, and the pricing for both our steel rings and plastic rings moving forward which I understand is a major concern for you.

There is no doubt that the most efficient means of production is switching to the plastic rings. This is the “competitive advantage” in our industry and currently there is only one producer with said advantage. Switching to a plastic production line will cost the plant right around $1,800 but obviously minimizing losses, as well as expenses is priority number one. My pricing plan will allow for a depreciated steel ring, this means cut the price of 100 steel rings 36 dollars. This 36-dollar decrease will allow for a continued 20-dollar profit to be made per 100, as well as continue to increase customer and brand loyalty. As you can see from the numbers:

This obviously will hurt our overall margins, but taking everything into consideration is extremely important. The plastic product has 4 times the life, of our original steel product. This will greatly decrease the number of needed rings per customer, meaning that we will need to pick up sales by changing our marketing plan.  Losing market share by not entering the market at this time, is not an option. The lower sale price will allow for customer satisfaction, as they see they’re getting the product at a great price. The numbers also point to our only competitor “Henri Poulenc” providing their plastic rings at a premium price, higher to that of the proposed pricing option. This may allow for an extraction of some of their customers, making up for the potential 10% loss of customers as discussed.