Six Action Areas To Improve Performance In The Industrial Goods Sector

• Published date: 19 March 2024
• Law Firm: AlixPartners
• Author: Patrick Widmaier, Michael Hoos and Sven V'gele

In our previous article, we outlined the turbulent environment ahead for the Industrial Goods sector in 2024, buffeted by a swathe of volatile macroeconomic factors that will require companies to rapidly adjust to and strive for a more proactive, front-foot positioning when facing into these headwinds.

Our recent Industrial Goods study has highlighted six critical areas where companies are likely to be experiencing challenges, all of which can contribute to increased competitiveness and profitability if improvements are made.

Here we outline the key fields of action for sector players - where the pain-points lie within each, and how the implementation and application of new strategies could prove transformative for future business performance.

1. Pricing power

Cost pressures, with observable differences between industrial segments, are generating the necessity to build up the power to enforce price increases.

Prior the inflationary spikes of the past two years, pricing largely focused on margin enhancement and optimizing sales prices for customer categories or individual customers. Rises were infrequent, usually only when triggered (e.g. by review of pricing discrepancies across a portfolio), and there was limited willingness to cooperate by customers as they were viewed as pure profitability enhancements for suppliers.

Now, however, pricing is a key tool in mitigating cost pressures and - in some cases - protecting the going-concern of an overall business. Interaction with and suppliers or customers on this topic should be frequent, and adjustments must be flexible enough to respond to accelerating or decelerating cost developments.

Furthermore, it also has now become a vital tool for optionality - for example, in steering decision-making regarding global vs. local sourcing through these differing lenses:

• Availability: Cheaper prices with longer lead times and production abroad vs. higher prices with shorter lead times due to near-shored production.
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