Shahista KARIM 14140896
Cynthia SHONTAN 14137935
Kaan AYDIN ATAOGLU 14123053
Choothan THAMMAPALO 14135090
Meykandan KRISHN...
Table of contents
 Company Background
 Theory of pricing policy
 Identify a recognized pricing point
 How to protect C...
Background Operations and SCM
Company A
 1st tier automotive supplier of metal pressings and assemblies
 It produces 1mi...
Operations
 The result of the steel material used produces a waste scrap
 The company gets an amount of 733 tonnes waste...
• about the product they are selling (
Conduct some research on the market
reaction to the products provided)
• Is there a...
PRICING POINT : Selecting the
pricing objective
Survival
Objective
• To Cover the
cost,
especially the
variable cost
• Pri...
IDENTIFY A RECOGNISED PRICING
POINT : Defining the pricing strategy
ECONOMY
PENETRATIO
N
SKIMMING PREMIUM
HIGH
QUALITY
LOW...
IDENTIFY A RECOGNISED PRICING
POINT : Choosing a pricing method
 Cost-Plus: Production costs are clearly defined and
then...
To protect the company from
extreme price fluctuations
 Company A needs to have an agreed contract with the
recyclers on ...
STREAMLINE/REDUCE THE
PROCESSING TIME
Raw
Materials
Sorting
Scrap
Storage
Transport
Recycler
Melting
Cutting
Cooling
Finis...
STREAMLINE/REDUCE THE
PROCESSING TIME:
1) STANDARDISATION
CUTTING
MELTING
Team 1 Team 2 Team 3
Melting Melting Melting
Coo...
Automation
 Automation is used to get rid to monotonous
tasks.
 Saves resources for the company.
 Reduces manual errors...
Protect Company A from pilfering
of scrap
 The company needs to set up security measures by
acquiring a warehouse which u...
Protect Company A from Risk of
Road Traffic Act Fines (RTA)
 Ensure the designated drivers follow a rule which is to redu...
Protect Company A from High
Cost Implementation
The company can be protected from spending too much
by following the below...
weights advised from off-site
weighing
Multi Point Weighing:
1. The dry weight of the truck is determined by the on sight
...
Action plan for the project
Receiving Raw
material
Sorting
Melting
Cutting
Scrap
Storage
Transport to the
recycler
Mouldin...
References
 Encyclopedia of business, 2nded (2013). Pricing policy and
strategy. Available at:
http://www.referenceforbus...
Any questions ?
of 19

Pricing strategy in operations and SCM

A business can use a variety of pricing strategies when selling a product or service. The Price can be set to maximize profitability for each unit sold or from the market overall. It can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Businesses may benefit from lowering or raising prices, depending on the needs and behaviors of customers and clients in the particular market. Finding the right pricing strategy is an important element in running a successful business.
Published on: Mar 4, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - Pricing strategy in operations and SCM

  • 1. Shahista KARIM 14140896 Cynthia SHONTAN 14137935 Kaan AYDIN ATAOGLU 14123053 Choothan THAMMAPALO 14135090 Meykandan KRISHNAN 14135265 Procurement Case study : Company A Operations and Supply chain management
  • 2. Table of contents  Company Background  Theory of pricing policy  Identify a recognized pricing point  How to protect Company A from the price fluctuation  Streamline or Reduce the processing time How to protect Company A from pilfering of scrap How to protect Company A from Risk of RTA How to protect Company A from High cost of implementation How to protect Company A from incorrect weight advised from off-site weighing
  • 3. Background Operations and SCM Company A  1st tier automotive supplier of metal pressings and assemblies  It produces 1million parts every year to single global OEM  The company uses a 25-30ft lorry full of parts to deliver to single global OEM every 14minutes  Company A ensures that their operations in distribution are always effective and on time as they will be charged a levy for line stoppage.  The company has a policy of working 24 hours from Mon-Fri so as to make ends meet for their clients  The main material the company uses is steel coil, approximately 1500 tonnes is used per month
  • 4. Operations  The result of the steel material used produces a waste scrap  The company gets an amount of 733 tonnes waste(scrap material) from the manufacturing of the steel coil.  The waste gotten is called “Slugs and Cuttings” and it has a specific cutting of 150mm * 50mm(1cm in diameter)  The waste scrap is deposited onto a conveyor belt  This waste scrap is then taken to a “scrap house” which is adjacent to the factory and contains 2 large and 1 small trailers.  There are 2-3 collections per day during normal daylight hours  The company then supplies the clean scrap which is generally called 8A in the market to recyclers in demand due to the form of materials compacted which can be used in foundries
  • 5. • about the product they are selling ( Conduct some research on the market reaction to the products provided) • Is there an established market price for similar products? And market expectations? • Demand in terms of quality and quantity What does the market say? • The price of the product will depend on the competition, what are their prices, their costs? • What are the key features and benefits of their products? • Does company A products have a clear point of difference or competitive advantage over competitors Who are my competitors? What do they do ? PRICING POLICY : Market and Competitors
  • 6. PRICING POINT : Selecting the pricing objective Survival Objective • To Cover the cost, especially the variable cost • Price low to stay in the market Profit Objective • To choose price that makes maximum profit • Set a return (a % on the cost) Volume Objective • To increase sales volume • Maintain the market share or increase • Can be an obstacle for competitor Quality Objective • High price to cover Quality cost, R&D, Branding • Develop and keep an identity about the quality, the exclusivity
  • 7. IDENTIFY A RECOGNISED PRICING POINT : Defining the pricing strategy ECONOMY PENETRATIO N SKIMMING PREMIUM HIGH QUALITY LOW QUALITY HIGH PRICE LOW PRICE VOLUME VOLUME PROFIT PROFIT
  • 8. IDENTIFY A RECOGNISED PRICING POINT : Choosing a pricing method  Cost-Plus: Production costs are clearly defined and then a target profit margin is added to make the final price.  Targeted Return: Investment costs are determined, and a specific rate of return is applied in order to get the return on investment.  Value: Build a price based on the value it creates for the customers  Psychology: Psychological or emotional impact is
  • 9. To protect the company from extreme price fluctuations  Company A needs to have an agreed contract with the recyclers on a standard price for the weighted scraps regardless of the price fluctuation in the economy.  The company can also set up a warehouse to store the scraps in the case of low pricing system and whenever there is inflation the company can decide to take it to the recyclers.  They could also purchase a weighting machine to measure the amount of the waste scrap and sell it when the price of the economy is favorable.  Furthermore, the company can source for investors that will be able to forecast the pricing rate for the waste scrap in future times depending on the economy of the market.
  • 10. STREAMLINE/REDUCE THE PROCESSING TIME Raw Materials Sorting Scrap Storage Transport Recycler Melting Cutting Cooling Finished goods Quality control Transport Manufacture rs WASTE Moulding
  • 11. STREAMLINE/REDUCE THE PROCESSING TIME: 1) STANDARDISATION CUTTING MELTING Team 1 Team 2 Team 3 Melting Melting Melting Cooling Cooling Cooling Cutting Cutting Cutting • Identify waste in the process • Study the process • Analysis • Implement efficient activities • Monitor the activities 2) AUTOMATION
  • 12. Automation  Automation is used to get rid to monotonous tasks.  Saves resources for the company.  Reduces manual errors. Investment in new technology  Feasibility study.  Return on Investment.  Sustain in the market.
  • 13. Protect Company A from pilfering of scrap  The company needs to set up security measures by acquiring a warehouse which uses locks and is well lighted to be able to store the scrap by using CCTV (Security Cameras, Alarms or Motion Detectors).  They should ensure that all landscaping pathway that allows criminals to hide from view of the company must be removed.  Installation of exterior lighting and protect fixtures with locked metal cages should be increased.
  • 14. Protect Company A from Risk of Road Traffic Act Fines (RTA)  Ensure the designated drivers follow a rule which is to reduce vehicle speed using GPS.  Decrease idle time using GPS tracker  Install a GPS in all Lorries which serves a purpose of improving routing and dispatching.  Make sure there is proper vehicle maintenance in order to prevent line stoppage and implement fuel card integration.  Since the company works round the clock, there is a possibility that the workers will be experiencing fatigue and this can lead to accidents, in order to prevent this there should be shifts between the drivers and those working in the manufacturing company.  In addition, the company needs to get a warehouse close to the company (Single global OEM) that needs the steel. In this way the assigned Lorries delivers materials to the warehouse and whenever the single global OEM
  • 15. Protect Company A from High Cost Implementation The company can be protected from spending too much by following the below steps  Create a budget plan to know what the company needs in order of priority  Source for various suppliers that can offer the raw materials company A needs at a lower cost  Create a balance sheet to keep records of the expenses spent so as to be able to detect/monitor the amount of money spent on a particular thing if it’s over the budget or lower.
  • 16. weights advised from off-site weighing Multi Point Weighing: 1. The dry weight of the truck is determined by the on sight weighing bridge. 2. The weight of the fully loaded truck will be weighed on sight to determine the weight of scrap. 3. The fully loaded truck is again weighed by a 3rd party weigh bride agreed by both the companies. 4. The weight of scrap in the receipt note from the recycler should match with the values determined by the on sight and 3rd party weigh bridge. 5. If the machine on sight is faulty, the weight on the receipt note should at least match with the weight provided by the 3rd party company.
  • 17. Action plan for the project Receiving Raw material Sorting Melting Cutting Scrap Storage Transport to the recycler Moulding Cooling Quality control Transport to the warehouse TIME Energy saved to Improve efficiency in each of the primary processes within 1 year by 10% PRIMARY PROCESS SECONDARY PROCESS
  • 18. References  Encyclopedia of business, 2nded (2013). Pricing policy and strategy. Available at: http://www.referenceforbusiness.com/management/or- pr/pricing-policy-and-strategy.html. [Accessed 13 November 2014]  Ian Baker Moodle course on Pricing Strategies. Available at : http://moodle.bcu.ac.uk/course/view.php?id=5777 [Accessed 18 November 2014]  Nab (2010) How to develop a pricing strategy. Available at: http://learn.nab.com.au/how-to-develop-a-pricing-strategy. [Accessed 13 November 2014]  Princing methods http://entrepreneurs.about.com/od/salesmarketing/a/pricing strategy_2.htm [Accessed 17 November 2014]  RTA
  • 19. Any questions ?

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