One of the fastest ways to destroy a manufacturing company may be raising your prices at the wrong time.
Most shops assume higher prices automatically create higher profits. But when increased rates cause production volume to fall, fixed overhead—including rent, equipment payments, utilities, taxes, software, and facility costs—must be spread across fewer sales and fewer machine hours.
This can create what we call the Burden Rate Death Spiral.
In this video we demonstrate how:
• Increasing shop rates can drive away high-volume work
• Lower sales can increase overhead as a percentage of revenue
• Poor machine utilization raises the true hourly cost of equipment
• Low-margin parts can support purchasing power, production flow, and customer relationships
• Profit percentage and total profit dollars are not the same thing
• Removing one product family can negatively affect the entire manufacturing system
Not every low-margin part should be accepted. Some parts create quality issues, disrupt production, consume valuable capacity, or genuinely lose money. But manufacturers must look beyond an individual number on a spreadsheet and understand how every part affects the larger operation.
Sometimes consistent, lower-margin production is more valuable than unpredictable, high-margin work.
Before increasing your shop rate, understand how the decision will affect sales volume, equipment utilization, material purchasing, overhead, and long-term customer relationships.
Whatever you do, stay out of the Burden Rate Death Spiral.
Contact
Laserweldinc.com
Team productivity Model
https://manufacturingrevival.com
Channel: LaserWeld Texas
Published: 2026-08-06
Video URL: https://www.youtube.com/watch?v=e09s0OTfMl4