Price forecasts can misfire for supply management without added insights into costs and margins
About the Industry in Our Example and Data Sources
Because of its unique price, cost and margin position, the industry that machines precision products provides an excellent example for our supply/demand negotiation scenario. (Some may say, the example is a ringer, and they'd be right!) Classified in the North American Industry Classification System (NAICS) under the six-digit industry code 332721, precision-turned manufacturers are engaged in machining precision products of all materials, generally in large-volume jobs using machines such as automatic screw machines and computer numerically controlled lathes. While the margin details in most industries aren't as dramatic as this one, the basic analytical approach is instructive for all.
Data on prices for precision-turned product manufacturing come from the U.S. Labor Department's monthly producer price survey. Cost, margin and demand metrics have been calculated by Thinking Cap Solutions, Inc.'s Leveraged Metric Intelligence (LMIQ) economic model. More information about the LMIQ cost model and the authors of this article can be found on the Web at www.ALERTdata.com.