Market Systems: Finance vs Manufacturing
Today's episode is all about the pricing and bidding system used in the precast concrete restroom industry. Since I come from a quantitative finance background I also cover open vs closed auctions where I briefly discuss the stock exchange in comparison to dark pools. The precast concrete restroom industry is closest to dark pools however there are only bids placed with no ask. You end up with one customer requesting bids based on product and project specifications.
Most small manufactures and specifically precast companies use cost plus. Cost plus is the easiest way to price however it is very inefficient. It's just the product cost to manufacture plus a margin and there is typically a set margin. The high freight costs in precast prevent competition however in the restroom business they have been able to add enough value to the product to make it feasible to ship all over the country including Hawaii.
While I was working in the restroom business we set up automation to get the base costs more quickly and efficiently and then went above and beyond by building models for supply and demand using wins and losses from past bids.
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