Service Parts Pricing
Bringing industry leadership to service parts business
Nothing is more difficult to optimize than parts pricing because each manufacturer carries hundreds of thousands of parts with frequent lifecycle events and varying degrees of competition. And despite having high margin contributions, aftermarket pricing is an afterthought and is typically handled by resource constrained business units.
Here are some simple questions about your aftermarket pricing capabilities:
- Do you manage parts pricing using strategies other than cost-plus?
- Do you know on which part numbers you should be raising or lowering prices, to improve your top and bottom lines?
- Do you know on which part numbers you have a competitive advantage and can improve margins? Or where you need to be competitively priced?
- Can you identify the true profitability of each part you sell across each channel?
- Do you leverage market share, lifecycle, warranty, and competitive price information to set optimal prices?
- Can you take pricing action on all your parts more frequently than on an annual basis?
If the answer to most of the above is a “No” or a “Maybe,” it is not surprising. Given the complexity of service parts, manufacturers often struggle with building the capabilities to effectively set and manage parts prices, and miss margin and market share improvement opportunities.
Why Invest in Service Parts Pricing Now?
- Parts pricing is frequently an untapped gold mine especially in times where core products are struggling to deliver profitability.
- We have seen companies who undertake parts pricing with new tools achieve from 1 to 5 percent in margin improvement through a combination of cost reduction and revenue improvements.
- Technology has finally “caught up” with the demands of service parts pricing, allowing pricing managers to effectively manage profitability for hundreds of thousands of SKUs (Stock-keeping Unit).
- Competitors are rapidly adopting these tools and companies that hesitate will likely see market share and profit erosion.
Deloitte’s Service Parts Pricing Experience
Deloitte’s proprietary service parts pricing related consulting services involve helping companies take a holistic, integrated approach that includes an assessment of current capabilities in the areas of data, process, analytics, strategy, organizational alignment and, technology.
We have assisted companies find millions of dollars in opportunity by helping them identify the right data required for pricing. We have also conducted detailed analyses on these disparate data sets that led to pricing improvements that the companies executed rapidly. We then worked with their business leaders to help them develop long-term pricing capabilities as a sustainable advantage for their business.
Our capabilities include:
- Full range of integrated service parts pricing consulting experience, knowledge and skills involving: strategy development, analytical toolkit development, process design & improvement, technology planning & implementation, organizational alignment and governance and optimization.
- Access to tax planning experience, knowledge and skills.
- Deep service parts pricing consulting experience with the world’s largest Automotive OEMs (Original Equipment Manufacturers).
- Extensive aftermarket pricing consulting experience with major Aerospace and Defense and High Technology programs.
- Consulting services in support of multiple projects to improve service parts management effectiveness in Telecommunications.
- Leading edge consulting experience in revenue management including promotions and marketing spend effectiveness.
- Proprietary methodologies and accelerators, such as Service Parts IndustryPrintTM, Service Parts Building Blocks and Diagnostic Toolkit, and SAP® SCM Strategic Value Assessment tool.
- Over 400 consultants around the world with significant pricing and service parts skills and experience.
- Using demonstrated frameworks and tools, Deloitte’s Pricing and Profitability Management practice has delivered services in support of over 150 pricing projects in a variety of industries
Deloitte and SAP/PMM (Pricing and Margin Management) by Vendavo
Pricing technology is a critical part of building and sustaining service parts pricing capabilities. Deloitte and Vendavo have worked together to help companies in their efforts to address their most pressing service parts pricing challenges including part number level pricing, detailed pricing analytics, competitive pricing, lifecycle management, segmentation, super-session pricing, workflow, and price list generation. All of this is available using easy-to-use graphical and worksheet formats.
Deloitte and Vendavo have jointly developed a SAP/PMM-based service parts configuration designed to enable a rapid launch of the solution to help reduce the time necessary to harvest margin improvement opportunities. In addition, we have also developed options to include cost-effective leasing arrangements designed to help avoid large one-time capital expenditures.
Given the potential for these benefits, there is no reason not to pursue them now.
Deloitte Delivers Service Parts Pricing Performance-related Services
Through the provision of our services to help companies in their efforts to build their capabilities to effectively set and manage service parts prices, we have seen companies find millions of dollars in revenue opportunities.
Deloitte can bring an experienced service parts pricing team to help you perform an assessment of your business, identify quick-hit opportunities, and develop a path to margin and revenue improvement. Managing prices for hundreds of thousands of parts can be complex. Let us help you in your efforts to make it simple.