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by Beth Stackpole, Contributing Editor   | Abstract: | New processes and software give manufacturers visibility around pricing, letting them gain control and win back margins. |
Talk about a pendulum shift. In the 1990s, it was all about rampant revenue growth. Then as the economy took a dive in the early part of this decade, manufacturers regrouped and put their energies into cost containment. With industrial growth now making a moderate resurgence, manufacturers are refocusing their efforts once again. This time, the emphasis is on growth, but with an eye toward profitability. Increasing sales, lowering costs, or squeezing suppliers can do only so much to pad the bottom line, however. That's why a number of cutting-edge manufacturers are endeavoring to get smarter about how they price their products. Armed with new end-to-end business processes and an emerging class of software -- dubbed price management -- manufacturers of all types are starting to gauge the price elasticity for their products, discover and analyze price leakages, and enforce and manage pricing policies with the goal of becoming more adept at contracts and negotiations. Investing in new price management processes and technology can deliver dramatic, quantifiable results in fairly short order, meaning a matter of months, not years. Financial executives across all industries admit that they routinely leave between 1% and 5% of margin on the table because when pricing products they often lack visibility into such factors as volume terms and raw material costs, and because they have no way to enforce standard pricing practices. By identifying and then eliminating unprofitable business, manufacturers can bolster the bottom line. For example, inserting just 1% of margin back into the equation can increase a manufacturer's earnings by as much as 20%, notes Colin Masson, AMR's research director for supply network operations. [Click to continue] |