Industrial Manufacturing
Industrial Manufacturers face increasingly complex pricing challenges due to the destructive pricing practices of “cost plus” and “match the competition”. These policies result in unnecessary discounting, pricing erosion, and quoting below breakeven prices. Improving pricing is one of the most powerful ways to improve business and financial performance for manufacturing companies. PROS margin optimization software products drive the highest possible ROI and enable industry leading manufacturers to achieve Pricing Excellence.
Segmented or differentiated customers, products, and markets, and frequent pricing changes require industrial manufacturers to understand how to deliver real-time data from multiple sources to sales managers; making sure pricing data incorporates materials, labor, logistics, and services costs, purchase volume, product mix, customer demand volatility, inventory, frequency, and other factors. It is critical that customer needs are met while remaining profitable on a transaction by transaction basis. Industrial manufacturers are at a competitive disadvantage if sales, marketing, finance, operations, and management have limited visibility into pocket price and pocket margin, lack a uniform pricing strategy, practice unscientific ad-hoc pricing, and lack relevant and timely data.
Pricing Challenges in Industrial Manufacturing
PROS customers in industrial manufacturing achieve Pricing Excellence by using PROS science-based pricing software to stop destructive pricing practices. The most successful Industry-leading industrial manufacturers improve revenues and generate a high ROI by addressing complex pricing problems including:
Lack of visibility into true profitability over time: Sales Managers need adequate negotiation tools providing critical data including cost to serve, willingness to pay, current market climate, customer price history and other relevant benchmarks not currently available in price negotiations.
“One size fits all” pricing: Actionable differences in customer segment purchase behaviors allow pricing based on customer value or product end use creating incremental revenue. Om addition, systematically tracking wins and losses (win-loss tracking) and incorporate feedback into pricing decision improves long-term competitive pricing and improves profitability.
Production and services costs: Prices change more frequently than ever as industrial manufacturers update prices due to increasing raw material and labor costs, increased logistics costs, and increased setup and services costs. Manual price updates require significant effort with dependencies on spreadsheets and error prone manual processes. Breaking these limitations simplifies guideline enforcement and improves revenue.
Market consolidation and global outsourcing: Cots pressures serve as a catalyst for merger and acquisition activity while competitive pressures transform traditional products companies to move up the value chain to become service provider too. Further cost pressures have caused outsourcing of non-strategic processes and global coordination of research and development, manufacturing, and quality assurance. Increase confidence in outsourced operations increases the complexity of determining the true cost-to-serve.
Supply Chain Disruptions: Alternative sourcing strategies including reevaluation of stock levels and raw materials suppliers can lower costs, however this increased collaboration requires high levels of integration. Sharing production schedules and even forecasts creates opportunities to improve revenue.
PROS solves the most complex pricing problems, providing a dramatic ROI. PROS industrial manufacturing industry experience includes:
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Cost pressures, demand viability, supply disruptions, increased outsourcing and market consolidation are changing competitive landscape have leading many industrial manufacturers to recognize that operating efficiency and market share do not always guarantee profitability. Industrial manufacturers are shifting focus to include pricing analytics, pricing optimization, pricing execution (deal management and contract management), and related science-based pricing software as a way of achieving sustainable returns.
Industrial Manufacturing - Pricing High Value Business Case
Challenge: Sales Managers lack visibility into the full set of pricing, cost, and other pricing waterfall components needed at the time the deal or contract is made. Lacking accurate data and optimized recommendations, destructive pricing practices of “cost plus” and match the competition” are utilized. No accurate understanding of the pocket price or pocket margin is available and profit leaks and unprofitable deals occur. Without PROS pricing optimization software, products, customers, contracts, and deals which appear profitable may in fact be net negative, loss generating activities.
Solution: PROS Pricing Software provides increased visibility into all pricing terms and cost-to-serve elements during price negotiations including surcharges, quantity discounts, volume bonuses, packaging and freight allowances, material, warranty, payment terms, and other costs of goods sold. PROS high performance science-based pricing software products prevent profit leaks by allowing companies to:
- Change focus from volume to profit; reducing unnecessary discounting, stopping unprofitable allowances, and focusing on high-value pricing improvement opportunities
- Incorporate future costs in profitability calculations; allowing industrial manufacturers to factor in the volatility of raw materials and energy costs
- Derive unique data including pocket price, pocket margin, cost to serve, and other metrics not available in any other system to help create a composite deal score
- Utilize what-if analysis to model the impact of price changes under consideration, and compare waterfall elements to benchmarks, targets, and oehr reference groups
- Show relevant market and competitive data at the time of the quote, including the average selling price, market indices, and segment optimized willingness-to-pay
- Analyze distribution of margins across the enterprise using band analysis and gain visibility into the effectiveness of margin improvement activities through price demand history
- Evaluate the overall deal attractiveness to facilitate more profitable contract price quotes.
Value: Increased margins are generated by the ability to identify waterfall differences and act on corresponding pricing opportunities across divisions, regions, products, or any other business entity. Better pricing decisions through visibility into the localized waterfall effects fro specific cross-segments of the business.
