Solutions Current Issues > July.Aug.Sept_2008 > The Right Things Right
Email LinkFACING ECONOMIC REALITY
When times get tough, strong companies survive and thrive.
by Rick Hudson
In the past several months, we have all experienced some jarring changes. From the credit crisis to increasing food costs, and the stunning spike in crude oil prices, to the shrinking growth rate in our gross domestic product, it’s clear that a new set of economic realities is emerging.
THE BUCK STOPS HERE:
Rick Hudson is
president
and CEO of RL Hudson.
So, how do we respond to these changes? It seems to me that the first step is to acknowledge reality. Someone told me once that not everything we face can be changed, but nothing can be changed until we face it. We simply have to face the facts.
Facing economic facts right now in our personal lives means adjusting our spending. If our incomes aren’t increasing, we have to reduce what we spend on the non-essentials to make room for higher priced food, gasoline and utilities. In business, the same principle applies. When costs go up and revenues don’t, something has to give.
Here at RL Hudson, we’re facing the new economic realities head on. The fact is, our costs are increasing more rapidly than at any time in the 28-year history of the company. How are we responding? By reducing expenses, negotiating with our supply base, finding innovative ways to save customers money and yes, by passing on a portion of our increased costs.
Raw material costs for rubber and plastic products have escalated dramatically in recent years. These prices are closely tied to the price of oil, which has doubled in the past year alone, and is up more than 250% since 2004 (for an in-depth explanation of material price increases, see the Tech Session). These facts have forced most major rubber and plastic suppliers to raise prices multiple times. RL Hudson, on the other hand, has worked to absorb increasing costs by improving efficiency and reducing expenses. We’re very proud that we’ve been able to avoid raising prices for as long as we have, but in June we had to look reality in the eye and make a decision.
A price increase is always unpleasant — whether you’re giving one or getting one — but we all have to understand the realities of business. Companies exist to make a profit. Businesses that don’t make a profit don’t survive. Of course, we have and will continue to share the pain and tighten our belt, but belts can tighten only so far. We’re keenly aware that paying higher prices is a serious challenge for our customers, but so is replacing a supplier that has gone out of business.
RL Hudson has watched as a number of our respected competitors have closed their doors recently. I don’t profess to know the details behind these unfortunate situations, but I do wonder how these companies responded when economic challenges arose. Did they make the necessary adjustments, or did they leverage their future on the hope that things would get better? We love what we do here too much to risk our future. We want to be here to serve our customers for many years to come.
That’s why even as we’re forced to adjust prices, we continue to look for new ways to cut costs and mitigate future increases. The answer, we believe, lies in both innovative and collaborative effort — working together with our customers to explore product redesigns, leaner production methods, and creative material solutions. RL Hudson’s engineering, product development, material technology and supply-chain management teams are constantly seeking ways to save our customers money while guarding our own fiscal well-being. It’s all part of doing the right things right.
