A $40 Million aluminum tube, extrusion company served all customers with requested customized products.  The company slowly declined in profitability and, eventually, fell into a loss.  A product and activity analysis identified an extremely efficient low cost manufacturer but one that was filled to capacity and losing money.

The actions on the customer side included:

• Firing four customers.  The smaller customers who required an average of 40 percent price increase were told to look elsewhere for a supplier, as the company could not supply at those prices.  Three of the four customers came back within six months pleading to return at the increased price.
• A large customer needing several specialized services, such as deburring, had those services eliminated to gain profitability with the customer’s agreement.
• Price increases were negotiated in spite of fixed price contracts.

Since the manufacturer was, in fact, an efficient, low-cost producer, the increased prices were still better than most of the competition.