The domino effect of external pressures such as fluctuating tariffs, inflation, and disruptive competitors are making significant waves throughout the manufacturing sector. This impact is felt immediately by pricing analysts who must react quickly to adjust prices AND figure out how price changes align with existing customer agreements, all while protecting profit margins.
Most manufacturers still manage pricing in spreadsheets. As the number and size of spreadsheets increases, the speed and accuracy of making price changes declines. But when lean principles migrate beyond the plant floor into other parts of the organization, the pricing function - too often regarded as a “back office” activity - becomes an efficient business driver. Pricing analysts are elevated beyond simply being number chasers. They instead become strategic partners in driving business results and winning and retaining customers.
Leading organizations replicate their manufacturing process improvement activities in the area of pricing process improvement. No longer left juggling spreadsheets full of incomplete data or spending too much time on the execution of number-crunching tasks, their pricing managers are becoming empowered through technology to align business strategies and implement the right price changes to support them.
Manufacturers Learn to Consolidate and Centrally Organize Pricing Data
Manufacturing pricing managers almost always deal with highly dispersed and disorganized data. Even simple price adjustments begin with locating and sifting through massive amounts of pricing data living across multiple spreadsheets, which are usually kept in local hard drives throughout the company.
Confirming the most updated version of the pricing data, the new cost file, and format change is cumbersome at best, and horribly time-consuming and inaccurate at worst. Too often a manufacturing pricing manager is left questioning if they are working from the latest version of prices used in customer agreements.
Locating and validating key input data becomes a painstaking process taking weeks or months. Without one central location of “pricing truth,” it is nearly impossible for pricing analysts to execute price changes quickly, accurately, and in alignment with deeper pricing strategies.
By consolidating data into one centralized platform, pricing analysts can efficiently coordinate a roll-out of any number of price adjustments. The elimination of pricing spreadsheets pays huge dividends by giving pricing managers more time to consider the big picture and conduct a comprehensive view of the pricing actions needed to maximize revenues and profits.
Once data is centralized and organized, the next leverage point is to define pricing methods and develop corresponding pricing formulas which calculate price adjustments consistently and accurately for each particular situation.
A library of pricing “plays” is much easier for manufacturers to establish and apply with a central workplace of data. The use of automation in these tasks removes the tedious work of going row by row in spreadsheets in a futile effort to prevent errors.
Manufacturers Must Gauge the Impact of Price Changes Before Rolling Them Out
For manufacturing pricing teams to serve as strategic partners to commercial sales teams and executive stakeholders, they require an accurate gauge regarding the impact of price changes on major KPIs such as margin rate/dollars before instituting those changes. By linking price adjustments to top level KPIs prior to making changes live, stakeholders can see the projected outcome of pricing decisions and provide feedback to adjust when necessary. Pricing analysts can then share the potential impact of both external market factors and internal conditions with an executive team in real-time using interactive modeling tools. This leads to better, more collaborative pricing decisions.
Manufacturers Must Automate and Diminish the Exception Requests from Sales
After pricing managers update prices, they then have to update existing customer agreements with those price changes. Tools that automate the agreement update process now allow a pricing analyst to launch a campaign and schedule price changes.
Automating these sales processes increases confidence in pricing by reinforcing the strategic thinking behind the price changes. As manufacturing sales reps work to adjust agreement prices with customers, they are better equipped to explain the reasoning behind the changes and maintain a healthy customer relationship without resorting to unnecessary discounts or triggering a flood of requests for price exceptions.
Communication is key, and price managers should communicate frequently with sales reps about the “how” and “why” behind pricing strategies, so they can earn the trust of distributors and end customers.
To keep up with an ever-changing manufacturing supply chain landscape, it is imperative that organizations find the right price management tool to centralize such massive amounts of pricing data and comprehensively and accurately recommend price changes.
Armed with the ability to analyze massive amounts of internal and external data points as well as the ability to simulate the impact of certain pricing adjustments, pricing managers can then spend less time on executing tedious tasks, and more time focusing on strategy and interdepartmental communication.
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