Pricing Strategies for The Future - Simplicity is Complex..

 Far too often, pricing for distributors turns into a futile exercise in juggling. At any given moment you may be dealing with up to thousands of customers purchasing from your list of hundreds of thousands of products after intensely negotiating their contracts. Mixed with supplier prices, transportation, and other costs, this can lead to razor-thin margins. Add deliberations with your suppliers and wavering inventory turnover rates and it can become too much to handle.

Now factor in the multiple technological solutions distributors tend to use to manage their various data elements, such as customer rebates, supplier programs, competitive cross reference files, etc. This creates a cycle of missed opportunities to improve margins and profit. One could make the point that it's likely that you need a real system to help you navigate the complexity of such a pricing model, but the reality is that when you think about it, Simplicity is complex.


Most distributors still adhere to traditional pricing methods that focus their efforts on avoiding complications. Whether they base prices on cost, their customers, or their competition, a simplified pricing model does more harm than good, despite the occasional growth spurt. But today we make that point that we need to change the way pricing is viewed. “Embrace the complexity” because in the end it's really very simple.

But, how you ask? There are three aspects of the distribution pricing model that are primed for disruption and it starts with being open to change.

Step 1. Building a Pricing Function

Pricing, as distributors know it, relies heavily on the cost of the product or raw material. From the get-go, it seems like minimal control of the price is in the hands of the distributor; the supplier sets the starting price level. More often than not, the price charged by your supplier will fluctuate, and you will follow suit as you see fit to avoid losing much business. Wouldn’t it be nice to have the guidance to know when and where you can pass along these price increases? Within the structure of your organization should be a pricing function.

This can be in the form of a centralized group controlling the prices for the company, a decentralized function that allows each region or product manager to utilize their localized knowledge, or a center-led format, which uses the centralized group to set prices, but allows the decentralized group to have the final say on what to do. No matter what you choose, the important facet of this model is focusing more on pricing as an adjustable asset in your control to emphasize the value of your products, not the cost. Above I mentioned cost, customers, and competition. With the pricing function established, your new pricing models can incorporate all three, rather than just one at a time. As each aspect is incorporated, the value of your product begins to take shape.

This is the first step, but your pricing function cannot succeed with disconnected data.

Step 2. The Unified Pricing Database

Your new pricing team needs visibility. If they are pricing blind, you are leaking margins. By using multiple systems, your team is handcuffed by the level of analysis that can be performed. Consequently, cost plus or list price models become the chosen pricing option. Defaulting to these models removes the ability to deeply analyze how your business and products fit into the greater ecosystem.
To increase visibility into pricing options, adopt a platform that brings your data into one space. New profit opportunities will arrive as a result of the increased cross-analysis capabilities. Take your large accounts as examples. You likely have a few large accounts that receive the bulk of your attention. These are negotiated heavily and scrutinized at every step of the process to ensure maximum profitability. Market factors, competitor movement, and cost are all considered when setting and analyzing these prices.
Now, imagine if your data is in one place and that large account scrutiny can be automated across your entire portfolio of accounts, increasing the profitability of those deals.

With a unified source of pricing data, you will also be able to uncover opportunities to negotiate better supplier costs, optimizing your supplier rebates and costs.
The staff is in place and the technology is up and running. Progress is being made, but you still aren’t quite sure what to look for.

Step 3. Where to Look

Standard distribution pricing models segment at the base level: product category, region, and size of customer for example. While a good start, this is nowhere near enough. With the cross-analyses in your new system, you must look into internal and external data — current and historical. From these analyses you will be able to look horizontally, in addition to vertically.
Market factors are a great place to start. Are there big changes occurring? Are your suppliers’ raw materials being affected? Be proactive in your analysis and research to prepare your own system for changes.

Additionally, your customers are possibly the biggest source of insight. It seems obvious, but this group is frequently overlooked. When analyzing your contracts, look at your customer’s willingness to pay. Are they buying more of a certain product? Are they purchasing more products off contract? Are they not purchasing off contract at all?
These questions lead to immense profit opportunities and take all factors into account when defining your value. Of course, these are small on a case-by-case basis, but the incremental impact to your bottom line is substantial.
Segmentation by product category, region, and customer size is still useful, but more so when used in conjunction with other product, customer, and transaction attributes like: commodity versus non-commodity, strategic customer versus non-strategic, customer value and product classification.
Your pricing team can then work with your frontline sales organization by guiding them with data-based insights along with the supporting metrics and tools to ensure your frontline is confident in the guidance. A strong collaboration between pricing and sales solidifies positive pricing behaviors.

Focusing on cost or list price is a temporary profit squeeze that keeps you chasing an unsustainable benchmark of success. Often customers ask - What is the price for this item? In the MDS-Nx System that price is really a function or algorithm - so it's not a simple answer. But if you build a function and rely on your system it becomes a simple task , with a much more complex answer.

Ready to build a relationship with your technology providers?

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to sales@tshinc.com

Click here and tell us how we can help you with your business solutions.

Big Data, Decision Making for the New Age...

 Across many industries, both business planning and key decision-making are increasingly informed by big data. As pressure mounts to match business operations to the record pace of current, aggressive market innovation, more organizations are looking to base decisions on hard numbers in order to mitigate risk and maximize returns on investment. But faulty interpretation of data invites error in deriving and applying insights. These new risks have created opportunities for the CFO and Finance Teams to collaborate with other members of the company to usher in new ways of working and to obtain a competitive advantage in their markets.

One such risk derives from big data failures from information overload and resulting delays in decision making. The successful strategic use of big data requires two steps: deriving relevant insights and then implementing them to create informed strategies. Both of these steps have spawned problems within organizations today.

 According to a recent report, “Joining the Dots: Decision Making for a New Era,” by the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA), 32% of 300 C-level executives at large organizations from 16 countries around the world C-Suite said big data has made things worse, not better, for decision making.

With these new findings shedding light on common big data struggles, it’s critical that CFOs identify new ways of working with it. Finance is best situated to do so because of its unique position of understanding the whole, empowering the corporation’s existing information technology team, and collaborating with both HR and other members of the C-suite. 

Finance chiefs for companies interested in besting the competition in terms of the use of big data can overcome the roadblocks in two steps. Further, large companies are finding their decision-making structures are working against them. Common vertical hierarchies undermine the ability for a company to use existing skill sets, collaborate effectively, and execute initiatives swiftly, especially in response to the “information overload” that big data brings. In fact, 70% of those surveyed said at least one strategic initiative failed in the last three years due to delays in strategic decision making.

Step One: Mobilizing the Finance Function

The first action CFOs can take is spurring their companies ’ big data successes is vetting their finance teams’ capabilities. It’s essential that this be a discussion, rather than a performance observation, as the team’s abilities can differ greatly from what they’re tasked with executing day to day. Analyzing data and turning the most relevant pieces into strong business insights requires new and nontraditional competencies, including macroeconomic analysis, influencing organizational outcomes, negotiation and decision making, collaboration and partnering, and business relations.

If the current finance function does not have these capabilities, you should refer to a competency framework to help identify what skills and competencies are missing from your team. After all, investing in professional development is far more economical than looking to attract new, unproven talent, and no one within the organization has a better understanding of how to analyze numbers and apply them in a business context than the finance function.

Next, work with HR to implement training and professional development opportunities. This will evolve your finance team’s business skills, preparing them to speak in business contexts and contribute to strategic planning, thus helping to avoid scenario in which the organization misinterprets data.

Step Two: Fostering a Culture of Collaboration 

CFOs also need to become a catalyst for decision making structures that promote cross- team collaboration to enable their companies to achieve success from big data initiatives. This helps the business to benefit from your finance team’s new competencies. Bureaucratic processes are the common culprits for an organization unable to operate swiftly and efficiently, and you have the ability to partner with the CEO to break down these barriers, championing finance’s ability to provide solutions.

To do so, it’s important to instill “new age principles” across the organization. These include trust, collaboration and transparency. Greater trust among leaders allows exchange of information and discussion of current team challenges, inviting new ways of problem solving and thinking. By ensuring that managers of other functions are aware of meetings and offering them a seat at the business table when decisions are being made, a stronger culture of collaboration and transparency can be cultivated, helping to shine a brighter light on problems in order to develop true solutions.

Step Three: Build your System, Work the System 

A strong software system with business management tools and financial controls will go along way to making sure your analysis and action plans are implemented properly. 
By building an action plan based upon big data and having a business control system such as the MDS-Nx system. You company will be able to focus on the management tools and data and allow the system to police the day to day operations , with real-time alerts, business triggers and industry specific application awareness. 

With a third of organizations reporting that an initiative has failed from faulty use of big data, it’s time to take a look at the ways to set up businesses for success. The most effective organizations will lead by identifying existing talent, developing new competencies, and putting in place software and business tools to manage the action plan. In doing so, strategic decision making can keep up with today’s fast pace of innovation and competition.

Have it your way, payment processing with a personal touch.

We are excited to announce our new partnership with BASYS Processing. They are a family-owned company known for their world-class customer service. BASYS is a leader in the payment processing industry, and they have a proven track record of delivering personal payment processing solutions.

Learn why Basys and their approach can make your payment processing simple easy and efficient. 

FAMILY OWNED WITH A CULTURE TO MATCH

The BASYS company? Our employees. We have built an elite team of hard-working, passionate and fun people who are dedicated to helping make our merchants happy. No call center. No elevator music. No “press 3 to reach this department”.  Instead, we have a team of high-energy, client-focused individuals genuinely committed to our growing customer base. We achieve this by fostering an office environment that makes it easy for our people to come to work and enjoy what they do!

This partnership will add significant value for our customers, including these benefits:

·       Accept payments from within The Systems House software.  No need for additional systems.

·       No automated phone systems. The BASYS in-house support team answers every call during customer support hours.

·       Personal support from a knowledgeable Account Manager assigned to your business.

·       An in-house PCI compliance team dedicated to helping you become PCI compliant and remain that way.  This will increase your security and eliminate non-compliance fees.

To learn more about our partnership with BASYS, visit their website

https://basyspro.com/software-program-pages/the-systems-house/

If you would like to get started, contact Chris Miller at BASYS Processing. 

 Chris Miller  Ph. (800) 386-0711    Chris.miller@basyspro.com

 For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to sales@tshinc.com

Click here and tell us how we can help you with your business solutions.

Death, Taxes - we got you covered!!.

Building on the old expression , the only things certain in life are death and taxes , we are proud to announce at least one of those has become a little bit easier to handle. 

TSH has proudly partnered with Avalara to bring you the latest in Tax Compliance Software. 

Decrease the high cost and drain on your business

Employee time and expertise are expensive

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Without automation, your tax professionals are probably buried in endless tasks that could be offloaded. Every hour spent on tax management is an hour lost on other (more important) parts of your business.

Calculate your cost

Benefits of compliance automation

Reduce tax risk

Grow and scale without adding tax pain

Get more out of your existing technology and systems

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to sales@tshinc.com

Click here and tell us how we can help you with your business solutions.