Finding the Strategic Price by ProQuest


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									final thoughts                                                                                                      Strategic Price Management

Finding the
Strategic Price
By Andrew K. Reese
      n a downturn, every penny of profit is precious. And yet many

I     companies are missing out on an opportunity to improve their
      profitability because their supply chain functions are decoupled
from their pricing processes.
   So says Jamie Rapperport, founder and executive vice president             invoice discounts and cost-to-serve elements.
for marketing and business development with Vendavo (www.                        Rapperport points out that his company, Vendavo, offers a solution, a provider of enterprise price management and                   designed to provide the kind of framework within which companies
optimization solutions for companies in chemicals, high-tech, industrial      can both set overall pricing strategies and make individual pricing
manufacturing, consumer products, mill products and distribution.             decisions that align with those strategies to drive increased profitability.
   Historically, Rapperport notes, companies have looked to their             “Best-in-class companies take a fine-grain view to pricing, viewing
supply chain function to focus principally on driving improvements            price not as monolithic but as highly dependent on the kinds of
in the cost structure, enabling the company to exploit cost advantages        information that we’ve discussed, and Vendavo’s platform allows you
and mitigate cost disadvantages. Supply chain executives have focused         to take that fine-grain view rather than a manage-by-the-averages
to a much lesser extent on “cost to serve,” even though in markets            monolithic view,” he says.
like chemicals or other process industries, freight and other delivery           In part, what Vendavo offers could be seen as a reaction to the
costs are a very large component of the end price to the customer.            empowerment of Procurement that has taken place over the past
“Having a deep understanding of the freight and other delivery costs          decade as supply management executives have gained access to
for those customers is hugely important for profitability and should          increasing amounts of data, and increasingly powerful analytical tools,
be hugely important for pricing,” Rapperport says.                            that allow them to take a much more systematic, data-driven approach
   As a result, he continues, “Supply chain should be proactively             to what they are buying and how much they are paying for it. In a
positioning the function as a key driver of pricing decisions.                sense, that has put the suppliers at a disadvantage. However, enterprises
That means that in focusing on managing inventory, managing                   have been sitting on a vast amount of supply chain-related data that
availability, you want to look at the profitability of those products         are not available to buyers, and that information is tremendously
sold into any given set of end customer segments.” Supply chain, as a         valuable and should be used at deal time. Vendavo, Rapperport says,
baseline, should be providing accurate, timely visibility into capacity       is giving sellers access to that information and empowers them with
constraints, overall inventory position, available-to-promise inventory       the same level of data-driven analytical capability that Procurement
and the cost of servicing any given customer to the commercial te
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