Johan Östlin, Syncron presentation at Spare Parts 2013

Finding the hidden profit potential in a spare part business
Stockholm, 8 January, 2013
Johan Östlin – Pricing Consultancy Manager

COPYRIGHT © SYNCRON INTERNATIONAL AB 2012
Main Themes of the Presentation
•Understand how to, from a large scope of part prices, identify uncaptured potential both on sales and in price. “The devil really is in the details”!
•How to implement a simple 5 step method for capturing these hidden potentials

5 Step Method to Find the Devil in the Details
Optimized Prices
1. Find the devil in the details on your list price level
2. Market perspective on the market list price
3. Review discounts to customers on a customer net price level
4. Identify sales potential in customer spending profiles
5. Review cost for segments as a result of more refined pricing

Typical Aftermarket Pricing Categories
General Items
Captive Consumables
Captive Items
Commercial Unique
Commercial Commodity
Standard Items
Kits
Remanufactured Items
Commercial Competitors
Service
1

Building an Value Based Business Structure
Filters
Commercial Unique Items
Air Filters
Filter paper A+
Oil Filters
Water Filters
Filter paper A
Filter paper B
Product Segmentation Structure
Volume
Value Driver
Volume
Volume
Price
Volume
Captive Items
Feed Screw
Product Range A
Product Range B
Material A
Material B
Material C
Feed Capacity
Feed Capacity
Feed Capacity
PC Boards
Process Control
Flow Control
Product Reference
Product Reference
Generation 6
Generation 5
Product Reference
List Price
List Price
Filters
Commercial Items
1

Identifying Different Value Drivers
•Numerical Value Drivers
–Weight, Volume, Diameter, Area, Length
–Power, Torque, Capacity, Pressure, Flow
–List Prices, Net Prices, Cost
•Discrete Value Drivers
–Material, Coating, Pressure Class,
–Product Group, Shape, Profile, Assembly Position, Technology
–Features, Connectors
–Branding, Suppliers
–Process Operations, Surface Req., Manufacturing Complexity
Typical Value Drivers
1

Example Using a Numerical Value Driver
Sales Value
Price
Diameter
Price
Cost
Sales
1

Price
Diameter
Price
Cost
Target
Sales
Sales Value
1

Product Relation
20 % of Product Price
Price
Diameter
Sales Value
Price
Cost
Target
Sales
1

Price
Diameter
Sales Value
Product Relation
Price
Cost
Target
Sales
1

Identify Price Differences: Market Review
List Price
Market Price
Invoice Price
Pocket Price
Regional, country, channel, price control and segment adjustments
You start with this
Pocket Margin
You end up with this
2

Regional Price Management
Price
Diameter
Price
Cost
Target
Product Relation
2

Regional Price Management
Price
Diameter
Price
Cost
Target
Product Relation
Underperforming markets
2

Review Discounts: Customer Net Price Analysis
List Price
Market Price
Invoice Price
Pocket Price
You start with this
Customer-specific discounts, Formula price adjustments, etc.
Pocket Margin
3

0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
2000000
4000000
6000000
8000000
10000000
12000000
Discount [%]
Sales Volume
Discount Management
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
3

Discount Management
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
2000000
4000000
6000000
8000000
10000000
12000000
Discount [%]
Sales Volume
Gain Market Volume
Review Discounts
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
3

Driving Sales: Analyze Customer Spending Profiles
Analyzing purchase patterns can give you new insights and support your sales team
•Combine a detailed product segmentation with detailed customer information
•Pinpoint witch customers we actually sell a specific type of part (price potential),
•Pinpoint witch customer we don’t sell specific type of parts, where we actually could sell more (volume potential)
•Example: Identify customer that don’t buy Bearings = Push sales on these customers
Drill down in to Sales Data
“Identify customers not buying Bearings”
4

Review Cost
List Price
Market Price
Invoice Price
Pocket Price
You start with this
Customer-specific discounts, Formula price adjustments, etc.
Cash discount, volume rebate, etc.
Pocket Margin
COGS, Cost to serve
5

Purchasing Management
Price
Diameter
Cost
Sales
Sales
5

Questions?

Johan Östlin, Syncron presentation at Spare Parts 2013

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