Case Study: Pricing & Profitability Management in Manufacturing
Putting the parts together
A major manufacturer expected a sharp decline in new product sales during the coming year, when its prices would jump due to the cost of complying with new government regulations. The company would need to rely on its parts division for the bulk of its profits for at least that year and possibly beyond – but to do that, the parts division had to address a number of issues in its pricing capabilities.
The parts division was getting numerous calls from salespeople complaining about errors, inconsistencies and omissions in its price book. Underlying these errors was a maze of fragmented pricing processes, inexperienced staff, poorly defined roles and responsibilities, and the challenges of using three different systems to manage pricing for more than 2 million parts. The issues were so severe that executives believed that they were causing the company to lose sales and margin to its competitors.
The company decided to overhaul the parts division’s pricing capabilities to fix the price book errors, strengthen the internal control environment and increase the parts business’ profitability. With Deloitte’s assistance, the company:
As a result of its pricing improvement initiatives, the company expects to increase the parts division’s annual margins by up to $70 million.
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