Your vendor might have a spare capacity that you can access cheaply rather than expand the capacity in your business. This can happen for a warehouse, an assembly line, or any other type of business operation.
A factory was producing profitable output for its owners and yet had idle production capacity. Due to this underutilisation, they approached us to find suitable buyers for their spare capacity.
As it turned out, one of our clients could indeed use this capacity to reduce the stress on their own manufacturing system. An advantageous deal was struck where both companies benefited – one by using their spare capacity to earn extra revenue and the other by not having to invest money on capacity expansion or running their plants so hard that maintenance would suffer.
Depending on the circumstances, prices for such deals can be very attractive because of the possibility of marginal cost pricing. After all, each extra dollar is pure profit to the seller in these instances, given that fixed costs have already been paid by the core output of the plant.
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