Would Taking a Lean Approach to Pricing Help Manufacturers?
While following lean principles creates significant profitability improvements over time, those improvements aren’t always evident when the P&L is tallied.
Poor pricing methods, which result in over-discounting, effectively transfer the incremental profits from lean activities away from the company and into the pockets of their customers.
Ironically, the solution to this problem is so close that it’s often overlooked—apply lean principles to your pricing process. For instance, treat every price as a “part” and work to decrease your defect rates, or in this case, sub-optimal pricing decisions, as you “manufacture” these prices. Look at the quoting process with an eye towards identifying and eliminating waste.
According to a research survey conducted by AlixPartners, LLP, 60% of the surveyed executives expect that of the savings made from lean manufacturing, only half will be sustained in the long term. Consequently, leading manufacturers are realizing that the gains they aspire to create through lean activities can only be fully realized by applying lean principles to how their products are sold.
More on lean pricing on IndustryWeek.
IndustryWeek is an NED companion site within Penton’s Manufacturing & Supply Chain Group.
