Our initial project originated with the hypothesis that our client faced an overpricing issue that could be addressed by rapidly identifying the root causes & drafting policy recommendations to address them. However, while overpricing was identified (especially by stores strictly following ‘the rules’), we also determined that there was significant underpricing. Consequently, we adapted our methodology to build a market basket and business case to calculate how store net pricing practices were impacting our client’s EBIT and service performance.
The EBIT and service improvement opportunity was delivered by addressing three areas:
- Service Pricing Opportunity: Develop new value based pricing model, processes, organization and tools to shift away from cost plus pricing and thereby capture large EBIT and BRAND improvement opportunity
- Supply Chain Opportunity: Gain control over the client’s supply chain to support the value based pricing strategy and improve EBIT and customer service significantly
- KPI Management Opportunity: Redefine the KPIs that will drive the management and performance of the business and establish how this data will be collected, processed and shared
The outcome was that a multimillion EBIT and service improvement opportunity exists through new pricing and supply chain models. Therefore the project delivered its key objectives by answering the question ‘is there a case for change?’ (Yes!) and developing a strategy for our client to move forward and address the identified issues.
This opportunity delivered $40m or more in annual net EBIT* improvement, with initial benefits achieved in around six months