Zoning-In On Supply-Chain Profit Margins

Generally speaking, the higher up you go in the supply chain, the bigger the profit margins. This is true only up until the production stage however, as this is typically where the manufacturer has more of a focus on sales volumes, which means that they’d naturally be content with smaller profit margins.

In reference to the manufacturer, of course we’re not exclusively referring to the typical manufacturer in the literal sense of the word. It could be anyone who has the skills or materials to produce something of value at its genesis, such as how a coder has the skill to write code which can then be used to form part of something like an online casino.

Speaking of online casinos, that is indeed the industry we’re going to use as the subject of our case study, making for a great example with which to discuss the key pointers of how profit margins differ at the various stages of the supply chain.

Primary Production Phase

Looking at the typical online casino, the primary production phase is indeed that of the development stage, where programmers are commissioned to hammer out code that runs to resemble online casino games. Now naturally programmers make a good income from their work, but if you think about it from the point of view of the casino operators, if they are willing to pay programmers so much money for their skills then what does that say about how much money they have or how much money they expect to make once the solution has been created, delivered and deployed?

This is where it starts to become apparent that the biggest benefiter in the supply chain by way of profit margins is the retailer who offers the final product or service to the end-market.

We’ve jumped the gun here and moved all the way from the primary production phase to the end-market retail phase, but somewhere in between that is the secondary production phase, which is the phase at which most of the market-analysis, selling and reselling happens.

This is how outsourcing was born, a method of making money in which the rainmaker profits up to at least four times more than what the primary creator makes, with the primary creator or supplier doing all the work of course.

Ordinarily this is a balanced business relationship, although we could probably all agree that the outsourcers are perhaps the smartest of the lot since their “job” is basically just to source value somewhere and sell it on for a higher price than what they bought it for.

The online casino industry and in fact the casino industry as a whole is one of only a few industries wherein all parties involved in the typical business flow chain are happy with what they get, from the programmers who hammer out the code to run the games right up to the player who enjoys playing on the platform to possibly win the jackpot and fun to be had all around.

Every single member of this particular network has a real chance of walking away with some mega profits, which in the case of the bettor would be winning some money.

Colin Shaw
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Written by Colin Shaw

Colin has been in the finance market for over 20 years and specialises in best business practice to make an organisation profitable. The only man for the job when it comes to numbers and accounts with a keen talent for simplifying finance for the wider market.