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

Sa

les V

alu

e

Price

Diameter

Price

Cost

Sales

1



Price

Diameter

Price

Cost

Target

Sales

Sa

les V

alu

e

1



Product Relation

20 % of Product Price

Price

Diameter

Sa

les V

alu

e

Price

Cost

Target

Sales

1



Price

Diameter

Sa

les V

alu

e

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



Price

Diameter

Price

Cost

Target

Product Relation

Underperforming markets

2



Price

Diameter

Price

Cost

Target

Product Relation

2


Review Discounts: Customer Net Price Analysis



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

Dis

count

[%]

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

Dis

count

[%]

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



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


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


Questions?

Finding the hidden profit potential

in a spare part business

Stockholm, 8 January, 2013

Johan Östlin – Pricing Consultancy Manager

Johan Östlin, Syncron presentation at Spare Parts 2013

Business

Transcript of Johan Östlin, Syncron presentation at Spare Parts 2013