Can you really earn more by selling at a lower price?
At first glance, it seems counter-intuitive. Yet in the manufacturing industry, lowering your prices can be a formidably effective strategy for improving your financial results. Provided you control your costs… and above all optimise your industrial processes.
The economic reasoning: absorbing fixed costs and generating marginal profit
In a manufacturing company, a large proportion of the expenses consists of fixed costs : rent, salaries, depreciation, baseline energy… These costs are borne regardless of production volume. Whether you produce at 50% or 100% of capacity, you pay them anyway.
This is where industrial logic comes into play:
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Once the break-even point is reached (the point at which your sales cover all your fixed costs), each additional unit produced and sold generates only variable costs (materials, energy, logistics).
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If you lower your prices slightly to fill your factory, you absorb your fixed costs better. You thereby create a leverage effect on your overall margin.
In plain terms: producing more, even at a reduced price, can generate more profit, provided your processes are under control.
Filling the factory also creates the ideal conditions for optimising your industrial processes
Once your production lines are well filled, an additional performance lever becomes accessible:industrial process optimisation. And this is where true profitability is decided.
A few examples of high-impact actions:
Standardisation of operations
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Implementation or updating of SOPs (Standard Operating Procedures) in a format suited to your teams
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Creation of a customised standard operating procedure document template customised
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Reduction of performance gaps between operators
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Better control of manufacturing processes
Continuous improvement and operational excellence
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Implementation of lean management or the lean six sigma method
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Gap analysis via Ishikawa diagrams
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Reduction of bottlenecks in automated production lines
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Use of industrial simulation software (automation, electronics, mechanics)
Mobilising collective intelligence
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Implementation of participative management and collaborative management
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Skills development for every production line leader
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Operator contribution to the optimisation of production sequences
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Sharing and updating of the manufacturing file (examples, templates, definitions)
Technical support for industrialisation
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Strengthening the role of theindustrialisation methods engineer
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Process validation: industrial validation file
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Moving into production: industrialisation phase of a product
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Work on the prototype and the functional and technical specifications
Hidden margins at every step of the industrial flow
Theindustrial process optimisation does not only concern production. It also extends:
To logistics:
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Stock reduction through the implementation of pull flows
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Optimisation of the procurement process
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Automation of the logistics flow
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Better management of the supply chain
To document management:
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Structuring of the technical specification document
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Tools to support the design and improvement of industrial processes
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Error reduction thanks to document standardisation
To supplier selection:
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Implementation of supplier evaluation grids
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Regular account audits and selection procedure
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Cost reduction thanks to reliable partners
Concrete example: the case of a glass industry manufacturer
Let us take an example inspired by a real case.
A company in the sector of refractory materials for the glass industry sells its high value-added products (refractory bricks, mortars, specific cements). The order book is stagnating. Management decides on a selective price reduction to fill the factory to 90% of its capacity.
Simultaneously, we:
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Implemented a manufacturing process audit
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Identified several over-engineered manufacturing processes (over engineered)
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Reworked the job descriptions and SOPs
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Implemented a mechanical simulation software package to optimise thermal cycles
Result after 12 months:
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Unit manufacturing cost down 11%
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Scrap reduced by 27%
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Overall gross margin gain of +18% despite the initial price reduction
The key: combining industrial strategy and operational excellence
The success of such an approach rests on a long-term vision and coordination of all the players:
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Production line manager
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Industrialisation manager
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Product development officer
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Digital transformation consultant
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Industrial performance manager
An sound industrial strategy is not solely about reducing costs. It is also about better valuing internal know-how, making processes more reliable, and making the organisation more agile in the face of market uncertainties.
Conclusion: aim for the double lever
By lowering your prices strategically to fill your production lines, you do not sacrifice your profitability. You create the ideal conditions to trigger a virtuous circle of continuous improvement. optimise your industrial processes
Xavier Schuster
Consultant at SXE Consulting. Industrial consulting firm based in Luxembourg, 25 years of experience in operational excellence.
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