I’ve written in the past about the importance of being able to track real-world cost against each individual unit of production. That’s because with cost inputs like imposition yield, paper utilisation, worker productivity, fail rates, freight costs and SLA breaches – cost per unit can vary massively from order to order even within a single product code and therefore profit contribution.
The bigger reason to understand profit at the order level
But there’s an even bigger reason to be able to see profitability at the individual unit level. In print-on-demand, the profitability of each unit can vary widely based on time of year, seasonal purchasing behaviour, and consumer decisions around what makes up their order.
For example – if you are a diversified print-on-demand manufacturer with a range from t-shirts to cards, canvas to photobooks, calendars to drinkware—a product like photobooks is normally a strong contributor to total profit. But the profit contribution of photobooks changes dramatically as you shift from normal seasonal buying behaviour into the run-up to Christmas.
The profile of orders generated during June, July, and August looks very different compared to November and December. During mid-year, you might be getting a high proportion of photobooks, say, 12×12 inch size with a 60-page count on high-quality paper—orders with strong gross profit per unit.
But toward the end of the year, the order profile shifts heavily toward calendars, drinkware and other giftware products. Photobook order type shifts to smaller book sizes with lower page count. Volume is up, but gross profit contribution per unit is significantly lower. Even worse you may have acceptable gross margins for your photobook range but poor economics at Christmas time.
How money is made – can change (dramatically)through the year
So the whole way the firm makes money changes—and it’s critical that this shift can be seen and understood at the Product Code, Tertiary, Secondary and Primary Product Group level. Why?
Because you need that visibility to make the right promotional and pricing decisions to maximise profit. What I often see is:
- print-on-demand brands maintain digital ad spend when the cost of acquisition delivers a significant loss because the margin economics change at certain times of the year.
- Businesses don’t understand the different profit contribution of Product Codes within a broader product group (or even worse only see the firm as a whole) and make bad pricing decisions.
Knowledge is power, the power to increase profit
The reality is very few firms (to be honest – almost none in my experience) look at where profit is being made inside their product range. Most just run their businesses on the average, glancing at the P&L at the end of the month, comparing it to the same time last year, and never drilling deeper into the profit result to ask:
- What can I do to influence this outcome?
- What pricing changes can I make?
- What shifts in promotional strategy could change the order mix I’m receiving into the factory?
The end result of not having that capability is foregone profit.
If you’d like to know how you can embed the recording, tracking, and analysis of insights like these into the day-to-day DNA of your business, reach out—we’d love to speak with you about it.
