How we saved 76% off the already lowest price in China
A client came to us with a “Bottle Filler” assembly they needed to reduce cost on. This is a very common assembly sold in retail outlets, but only within its niche market.
It is usually made of two plastic injection molded parts, an O-ring, a SS spring and a hard Acrylic tube.
The client had an existing supplier in Shanghai for this niche industry. Their price was $1.20 each, but they were able to negotiate a rock bottom price of 80¢. One of my existing suppliers was 74¢. The client had a lofty target price of 50-60¢ they wanted us to hit because they wanted to grow market share fast and sell to the large distributors all over the world who coincidentally enough are mostly supplied by that same 80¢ supplier in Shanghai.
We knew this was going to be difficult because there are not many factories of this type of product out there. But we were up to the challenge. Not only did we meet their target, we beat it. Their current price is 36¢, and what makes this so interesting is we are indeed still using the clients existing supplier in Shanghai.
Even if you have a great price from an existing supplier, we can often get them to lower their price significantly.
How we do this is very unique. We work with that supplier line by line for each component to find out what parts in the assembly cost what. We do this because this supplier specialized in plastic injection molding, not making springs, o-rings or Acrylic tubes. Anything other than plastic injection molded parts they simply farm out to another supplier. This is extremely common anywhere in the world. Do what you are good at.
The problem with that is the supplier might not be very good at searching around for the best possible price on those other parts. Actually, they usually are pretty bad at it so are paying much higher prices than they should.
So what we did was put each individual component through our aggressive sourcing process and found the best possible suppliers for each component. We now supply these lower cost parts to the original supplier who then assembles them with their plastic injection molded parts. All suppliers are in the same region, so there is next to no waste in inland freight cost to get parts to the supplier.
We didn’t want to simply give the supplier the contact info for these lower cost suppliers because then they would be able to lower the cost of bottle fillers to the client’s competitors. This way, the client indeed has the lowest cost bottle filler on the market and is positioned to take an ever increasing slice of the market share. With prices like this, there is no reason why they can’t completely corner the market. The client estimates 1,000,000 of these are sold worldwide a year.
But we aren’t done yet. When we went through and aggressively sourced all the components, we also did this for the two plastic injection molded parts that their current supplier makes. Long story short, if/ when the client is ready. With a $3,500 investment in molds, we can get their price down to 19¢ using all new suppliers for all components. This option is available to the client whenever they want it, or they may never find it’s necessary. It’s up to them.