Import & export
An agricultural exporter depended on two large markets. Seven months to open a third route and know which orders actually made money.
+6.4 ptsGross margin
OVERVIEW
CONTEXT
Selling prices were negotiated with the market; unit costs were recalculated after the shipment had already left.
Two large customers took most of the output and held the pricing power. Every time raw material prices moved, the company absorbed the entire difference because contracts were signed at a fixed price for the whole season.
Unit costs were averaged across the whole factory, so no one knew whether a particular order made or lost money. Logistics costs, processing losses by raw material and the cost of capital while goods were at sea all sat outside the spreadsheet.
SOLUTION
Breaking down raw materials, losses, logistics and cost of capital for each product code and each route.
Each product code has a floor price tied to a minimum margin; the sales team may not sign below it.
Choosing markets by the technical standards the company already meets, not by size.
A simple hedging policy for long-dated foreign-currency revenue.
Building a raw-material price adjustment mechanism into new seasonal contracts.
Prioritizing capacity for high-margin product groups with stable demand.
Every cost was assigned to a product code and a shipping route, including the cost of capital for the time goods spent at sea. The results showed that one product group with large volumes contributed almost no margin once all costs were counted.
The price floor was applied to every new order. The company began trading with its first group of customers in the third market, starting with small volumes to verify technical standards and payment terms before scaling up.
WHAT'S DIFFERENT
No renegotiating on gut feeling. Renegotiating with a cost sheet both sides can verify.
Including losses and cost of capital — the items usually left off the spreadsheet.
The sales team was empowered to turn down orders below the minimum margin.
Verifying with a few real shipments before committing to large volumes.
Raw material swings are no longer borne by the company alone.
RESULTS
We used to be proud of our volumes. Once we counted every cost, it turned out our best-selling product group was the one earning us the least.
One customer accepted a raw-material price adjustment mechanism; the other reduced its volumes. The lost volume was replaced by the new market within two quarters.
Consumption norms by product code, logistics costs by route and actual collection times. Most businesses already have this — it just hasn't been brought into one table.
At this scale, a simple policy for long-dated revenue is enough. The goal is to reduce volatility, not to profit from exchange rates.
The technical standards the company already meets, payment terms and logistics costs — in that order — before considering market size.
A NEW JOURNEY STARTS HERE
A thirty-minute conversation is usually enough to name the bottleneck. The rest is designing a roadmap that fits your size and resources.
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