How to Calculate 和 Use Material Margin to Drive Competitive Pricing

Editor's note: This piece was originally published in 2021 和 has been updated to include additional resources. 

在计算 manufacturing costs 和 pricing, you can look at several different margins to determine efficiency 和 profit. These metrics often factor in many costs, like 开销, labor, 和 more. 材料的利润, 另一方面, are a simple metric that can contextualize your manufacturing costs 和 help you price competitively for your market.

How Material Margin Helps Manufacturers Set Competitive Pricing

Essentially,  material margin is the money you have to work with after you buy the materials you need to create a product. 不同于其他指标(毛利率, 营业利润率, 或贡献边际), material margin accounts only for the costs of the materials you use. It does not include costs for direct labor, 开销, or any costs other than direct materials.

Material margin can help you determine the right price for the right product at the right volume 保持竞争力. 例如, high-volume jobs typically have less 开销 complexity, so applying 开销 with traditional methods could overstate cost 和 price you out of the market.

If you have excess capacity (from idle equipment, 缺乏额外劳动力, 或费用支出), you may be able to take on smaller, 更复杂的工作, as long as the material margin is high enough to cover fixed costs.

How to Calculate Material Margin

Material margin dollars are revenue less material costs. 在计算 your material margin 和 material margin percentage, do not include direct labor, 开销, or any costs other than direct materials.

Here is a  simple formula to calculate your manufacturing material margin:

Material Margin (MM) = Revenue (R) - Material Costs (C)
Material Margin % = (MM) / (R)

If the material margin percentage is greater than 40%, you typically have sufficient margin to be profitable, even with complex costing structures. You also may have an opportunity to drop more to the bottom line. 

例如, if revenue is $100 和 material cost is $40, your material margin is $60, 和 your material margin percentage is 60%:

$60 (MM) = $100 (R) - 40 (C)
60% = $60 (mm) / $100 (r) 

This means you have enough margin to be profitable 和 an opportunity to increase efficiency through product volume without a significant increase in non-material costs. The higher the material margin, the more profitable that job could be, since 开销 is a factor of complexity, 没有定价.

If you suffer from low material margins, you have only two options to improve your bottom line: 提高价格 or 更低的材料成本. If you cannot use either option,  your pricing will not allow you to be profitable or competitive in the market. 

A material margin analysis allows manufacturers to approach pricing from a different perspective, which eliminates the complexity when looking at the overall profitability potential.

通货膨胀的影响

Inflation can impact material margins across various industries, causing a chain reaction down various distribution paths. 制造企业, 特别是, face significant challenges as they heavily rely on raw materials such as metals, 塑料, 化学物质, 和 energy to produce their goods. 

应对, companies often have to make a tough choice–they can either absorb the increased costs 和 accept reduced profit margins, or pass the higher costs to their customers through product price increases. 

Price hikes can make them less competitive in the market, so it is best to use the current or predicted cost of raw materials when making pricing decisions when inflation is high. Inflation can also disrupt supply chains, causing additional delays, higher transportation costs, 和 other logistical challenges, further impacting material margins.

结果是, businesses must closely monitor inflation rates, adopt effective cost management strategies, explore alternative sourcing options, 和 consider price adjustments to navigate the impact on their material margins successfully.