All Makes - Driver pricing - The Future

[markaudio]

Hi Guys,
As some of you know, I'm building drivers this week and next so it's all systems go on the factory floor.

Here's some news that's going to affect All driver manufacturing in the coming weeks, that is raw and finished materials prices. At this time, all driver manufacturing is being hit with:

A - 40% increase in the finished copper price (coils, copper fittings etc.)
B - 100% increase in Iron ore, leading to around 50% in finished steels (T-Yokes, Front Washers, frames etc).
C - 20% increase in processed sub-products from crude oil (Polymers for frames in my case, plastic fittings etc).
D - 30% increase in some Aluminium grades, mixed alloys could go up 50% (frames, some coils, fittings etc.)
E - Ferrite pricing for magnets, up this month by 10%. Higher +R-35 grades may rise further.........ooooouch in my case.

Needless to say, there's allot of nail-biting happening inside the manufacturing world right now, given that production volumes remain low compared from 2 years back.

So, if you've got build projects in mind, think about your buying plans because driver prices are set to rise. Alas, we don't control raw commodity prices.

More later,

Mark.

[Ty_Bower]

Thanks for the news, Mark. It's better to be informed, even if the news isn't pleasant. What's the bottom line? At this time, can you estimate the retail price increase in your finished product?

[Doppler9000]

Alas, we don't control raw commodity prices.

More later,

Mark.

You can't control market prices, but you can completely control your prices, by engaging on forward contracts. can't you?

John

[markaudio]

Originally Posted by Ty_Bower

Thanks for the news, Mark. It's better to be informed, even if the news isn't pleasant. What's the bottom line? At this time, can you estimate the retail price increase in your finished product?

Hi Ty,
Yup, none of us this end like this situation. I've come off the line (my 2 QC guys are doing good) to work on pricing. I'm looking to "pre-order" more parts to minimise the impact (cash flow permitting). Normally, I'd order the new batches around mid July, ready for the Autumn build season. But waiting this long will leave us more vulnerable to increased price rise grief.

I'm hoping to hold my prices to within 3 to 4% of current well into this year, but I'll have to call in a few favours, twist (nicely) a few arms etc. Wish me luck! Starting to make some supplier phone calls......

Cheers

Mark.

[Scottmoose]

Originally Posted by Doppler9000

You can't control market prices, but you can completely control your prices, by engaging on forward contracts. can't you?

Not entirely. Larger companies can certainly do that; smaller concerns like Mark have much less flexibility as they simply don't have the resources to be able to afford to have stock hanging around in anticipation of large orders. So, while they can plan a couple of months in advance, a lot of it is simply down to the whim of the distributor, and they invariably come up with a few surprises.

There is another point here though, and it's an important one. While I'm not a member of the Green Party, and I'm certainly not about to put on a sheet and wander the mean streets tolling a bell & announcing that the end of the world in nigh, our resources are finite. And they're running out. Yes, so the global finances are still in relatively poor shape, but nevertheless, the fact unfortunately remains, and it's going to be even more of a problem as nations like China, with their vast populations, industrialise. Ergo, we're all, in every walk of life, increasingly going to have to get used to two things:

1/ Higher prices, and

2/ Making better use of what we have.

The ripple-effect is starting to be felt in every industry, and unless they are willing to sacrifice performance, push prices up, or both, audio manufacturers are increasingly going to have to start looking at ways of how to get the most from the least. Call it efficient engineering. The time for the W.O. Bentley school of doing things has sadly passed. The people who told the future we're now heading toward? Colin Chapman & Sir Stanley Hooker.

I suppose a personal irony for me is that I love 'proper' multiway systems with big HE woofers, wide-band mids etc (not the stuff common these days with their XOs slap bang in the middle of our critical hearing BW), but perversely most of my attention has always been on FR / wide-band drivers, because I happen to like that challenge of squeezing ever more from minimal resources. Oh well.

Whatever, I have a feeling that we'll gradually begin to see a shift, away from the regular multiway setups in commercial gear, toward single-driver based setups. The FR / wide-band world has stagnated for a long time; with a few exceptions, it's largely been minor variations on the same theme. That might change as well (it'll have to). There are things that cannot be overcome (doppler etc.) but other issues can be, largely though applying decent engineering. Whether you happen to like the specs. etc. of his drivers or not, I doubt anyone could argue against the suggestion that Mark is one of the people who is doing that. But the world is going to change eventually, and I have a feeling it'll be sooner rather than later.

[markaudio]

Originally Posted by Doppler9000

You can't control market prices, but you can completely control your prices, by engaging on forward contracts. can't you?
John

Hi John,
Control my own prices??? .........Errrr No! Sorry John but you need to join the dots together. If you're feeling generous, I'll readily take a nice interest free and risk free loan from you. Then we can forward order with no worries.

Scott's made a good point about larger company buying power, but even they are being hit so its serious chaps. His post is worth a second read.

It's the law of supply and demand, can be a cruel mistress.

Mark.

[human.bin]

good luck man!

[Doppler9000]

Originally Posted by markaudio

Hi John,
Control my own prices??? .........Errrr No! Sorry John but you need to join the dots together. If you're feeling generous, I'll readily take a nice interest free and risk free loan from you. Then we can forward order with no worries.

Scott's made a good point about larger company buying power, but even they are being hit so its serious chaps. His post is worth a second read.

It's the law of supply and demand, can be a cruel mistress.

Mark.

We live in strange times, where credit can be tight, but interest rates are low...

I was speaking of hedging through financial contracts - a strategy that creates certainty of pricing, however I believe Scott is right, that creating and managing a hedge portfolio is beyond a company of Mark Audio's size. FWIW, here is a link to an article on Whirlpool's use of financial contracts to hedge metals price volatility.

Whirlpool starts hedging steel - 2010-03-11 08:00:00 | Purchasing

"Risk free"? I rather doubt it! ;-)

Ultimately, of course, increased demand and reduced supply will push commodity, and finished goods prices inexorably upward.

For me, the biggest worry is energy...I really think we all ought to think about hedging our energy positions...

By the way, Mark, any word on the TS parameters of the two replacement Alpair 10 speakers?

John