Paper Manufacturer Automates Pricing Practices to Improve Revenue and Margins

PROS Pricing Solutions Integrated with SAP Generates Billions of Dollars in Projected Revenue

A global paper products manufacturer attempted to implement a pricing solution through a PROS competitor, which was initially chosen due to a perceived SAP integration advantage. However, the company’s users found the application cumbersome and time-consuming. Ultimately, the competitor’s product  proved too difficult to adopt and only exacerbated the manufacturer’s pricing challenges.

CHALLENGE

Due to a complex distribution network that integrated global, national and regional price levels, this paper manufacturer faced several pricing challenges. Not only did the company negotiate specific SKU prices with its commercial end-users, it also followed a complex but necessary rebate structure for channel compensation accuracy with its distributors. The manufacturer could not commit the full attention and analysis needed for these pricing decisions and would approve price requests that negatively affected margins and profits.

Other key pricing challenges the company faced included:

  • Manual Pricing Analysis and Review - Setting price agreements required extensive analysis of countless spreadsheets and databases. Each of these 12,000 price agreements underwent a complex review and approval process involving price analysts, category managers and sales management. Once a price agreement was finally approved, it had to be manually entered into SAP.
  • Outdated Information - Data collection was hampered by nearly 100 pricing and volume-tracking spreadsheets, databases and other resources that were only periodically updated. After these updates, analysts and category managers spent days extracting and analyzing data. In many cases, guidelines used to evaluate price request quality did not accurately reflect what end-users where willing to pay.
  • Faulty Integration with SAP - Changing prices for distributors and end-users required frustrating, labor-intensive effort. Data was downloaded from SAP into spreadsheets for analysis and approval, and new prices were uploaded manually back into SAP – a time-consuming and error-prone process.

SOLUTION

PROS conducted a pro forma analysis of recently updated data to examine the upcoming 12 months based on current prices and costs. PROS Scientific Analytics enabled analysts to view more than 100 separate price waterfall structures, allowing the analysts to shift their focus from data collection to data analysis.

RESULTS

PROS pricing solutions delivered clear results over the competitor’s product:

  • PROS Scientific Analytics accelerated profitability analyses with a centralized, frequently updated data repository.
  • Allowed users to easily see current pricing and run “what-if” scenarios on price changes before they were executed to ensure the right changes were implemented.
  • Enabled objective evaluation of price agreements with hard facts based on margin opportunity and scientific price guidance for each price agreement’s long-term success built on a culture of partnership.

PROS pricing solutions enabled the company’s sales team to efficiently enter price requests and automate the data input process into SAP. Integrated with an opportunity management system, PROS automated price entries into SAP and offered offline capabilities for sales  representatives to use their smartphones to quickly enter price requests and work from practically anywhere. In turn, faster analyses meant reduced costs, more effective pricing decisions and higher margins.

Furthermore, PROS science-based segmentation demonstrated how to optimally segment distributors and end-users. It also delivered pricing guidance to salespeople, pricing analysts and category managers to pinpoint each customer’s willingness to pay.

CONCLUSION

PROS AI-powered price optimization provided the manufacturer with a few distinct advantages to generate billions of dollars in projected revenue:

  • Automated the process of implementing pricing decisions that are fully-integrated with SAP.
  • Significantly accelerated pricing analysis for identifying the profitability of thousands of deals.
  • Empowered sales reps to efficiently enter pricing requests and update price agreements.
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