Hello, I run a medium sized yard in North Florida. I have a serious problem with a good customer (large, charitable organization) that we have been doing business with for years. This customer brings me an average of about 1/2 million pounds of shred a year. I currently pay .0725/lb. for his shred and after processing it and shipping it to a shredder, I am currently recieving .11/lb. As it is, these margins are barely working for me with my current overhead (baler, insurance, fuel, labor, scales, endless expenses, etc).



I recently received a phone call from the man in charge at this company, who complained about the price dropping "drastically" over the last few months from .09/lb to .0725/lb. I explained that I always pay him as much as I possibly can, and that the shred is a commodity that moves up and down in price with the market. He told me that my main competition in town is offering him .09/lb. for his material and he is demanding that I match that price or he will take his business elsewhere.

I can't really afford to lose this customer, but I also cannot afford to pay him this much money for his material. Also, if I match that price, besides losing money, I think he will think that I have been "getting him" all these years. We've never had problems in the past over pricing. I'm kind of stuck here. Should I match it and hope to widen my margins if the market goes back up, or drop one of my best customers at a time that I really can't afford to be losing customers? Let me know what you think, and what you would do in this situation. Have you been in this position before? What did you do? How did it work out for you? Let me know!