Lilia, since August the factory has accumulated a large amount of cash (see below), which was necessary for investments in bullion for the peak period, new equipment, and end-of-year staff bonuses. I believe that they now have more than enough cash built-up and would like to propose the following changes to the pricing structure:
· While two conversion rates would still be used, both would be increased to reflect the increase in exchange rate since mid-April and the new structure.
The base conversion rate would increase from 38 to 40.
The other conversion rate would increase from 44 to 45.
· Metal pricing would be simplified so that only one conversion rate is applied (currently, the base rate is used below 20g and the other rate is used for 20g or more).
All metal pricing would use only the other conversion rate of 45.
· Stone pricing would be simplified so that only one conversion rate is applied (currently, the base rate is used below 200 THB and the other rate is used for 200 THB or more).
All stone pricing would use only the other conversion rate of 45.
· Labour pricing would be unchanged.
All labour pricing would use the base conversion rate of 40.
· Bought component, plating, and laser pricing would all be unchanged.
All of these would use the other conversion rate of 45.
· The changes would go into effect in December, assuming 1) you and Kim agree with the changes and 2) Poo and Rangsima understand the changes and are confident about applying them accurately.
· I would continue to monitor PMJ’s account balances. I believe the proposed changes are conservative and would not have a dramatic impact on the amount of cash going to the factory, but a slight adjustment may be required in January so that we go into the Spring Fair exhibition confident that we’ve achieved the right balance.
These adjustments will put an increased focus (and mark-up) on what the factory really does, it applies labour to convert raw materials into finished goods. Stones, plating, and even the weight of an item are all just design elements that has nothing to do with the factory, so the mark-up on these aspects should be relatively lower. Hopefully, this will better align with customers’ expectations and make our pricing more competitive when our quotes are compared.
Please let me know if you have any questions; otherwise, I look forward to discussing this proposal with you and Kim.