Our customer is a global company food ingredients manufacturer that transforms corn, tapioca, wheat, and potatoes into a wide range of high-value ingredients for various industries. With a century-long heritage, the company uses ingredient innovation and sustainable practices to help customers meet evolving consumer needs. Their portfolio of starches, sweeteners, texturizers, nutrition ingredients, and biomaterials enables manufacturers to create healthier and tastier products.
When certain regions of our customer’s business started hitting the limits of their informal, manual pricing processes, they began the search for a solution. To facilitate this process throughout the initial phase, the company focused on data segmentation, data cleansing, pricing policy creation, alignment with sales, and overall business restructuring.
Our customer operates a straightforward business model centered around corn-based products, primarily starches. The majority of their sales and invoices—approximately 99%—involve a single product, resulting in one SKU per order. As a company focused on commodities, their transactions are characterized by large volumes and low complexity. The core of their business involves procuring corn from the market, which serves as the initial stage of their supply chain. The procurement team’s success in acquiring inventory is a vital factor in this process. Once obtained, the corn is either resold in its original form or transformed, with the latter being more common. Transformation typically entails converting the corn into customized starches that cater to specific customer needs or producing marketable starches with standardized formulations.
Challenge #1: unscalable manual processes
Pricing practices at South American locations were largely manual, relying on spreadsheets to perform calculations and emails for approvals and negotiations. They performed formula-based pricing in spreadsheets, which was highly dependent on the price of ingredients like corn, flours, sugar, etc. New calculations had to be performed quarterly or even monthly to stay up to date with price fluctuations, which was time-consuming and labor-intensive, and with 5 different currencies to track, pricing was becoming too complex for manual processes to manage efficiently.
Challenge #2: informal and disjointed pricing and selling practices
Quoting practices at the company were too simple for the complexities of the industry. Many of the company’s pricing and quoting communications happened through informal emails, texts, phone calls— and even taking orders sometimes involved scribbling notes on a napkin. None of the information sent in negotiation or approval emails were tracked, and pricing and selling teams struggled to communicate accurate and timely information to each other.
Challenge #3: lack of cost and pricing visibility
The proliferation of manual processes in the food ingredients manufacturer’s pricing practices meant that tracking margin performance was virtually impossible. With contracts and negotiations taking place exclusively in emails and calculations residing in spreadsheets, teams had no way of knowing if they were setting optimal prices for revenue growth—or if they were leaving money on the table. They set minimal margin goals for every pricing channel, but without visibility into the actual margin, cost, or any kind of analytics, they never knew if they were meeting that goal.
Goals and requirements
Our customer wanted to change their pricing practices to be more formal, efficient, and data-driven. Having never used a pricing solution before, they identified several key goals and requirements for a new tech-based pricing tool:
- Improve margin visibility by integrating quick, actionable reporting on performance that allows them to track price realization and measure profitability.
- Centralize and connect data for pricing and selling onto a single, cloud-based platform that can be updated and accessible from all locations.
- Integrate new tools seamlessly with existing ERP system (SAP) and Salesforce CRM.
- Automate and accelerate labor-intensive pricing processes like recalculations and pricing updates so teams can devote more time to value-adding activities.
The company performed their due diligence before approaching PROS to help them adopt their first- ever tech-based pricing solution. A personal connection prompted initial awareness, but the company also referenced Gartner and compared PROS to competitors before making the decision. Ultimately, the PROS Platform stood out in the price optimization category for its ability to scale with global companies and integrate our solutions with complex pricing methodologies.
Price Optimization and Management (AI-powered Pricing)
Over the course of 10 months, PROS pricing science experts performed workshops, trainings, and demonstrations to acclimate our customer’s teams to their new tools and show them how they worked.
- Price Management. PROS added new applications to help the company’s teams capture the nuances of the different rules that could be created, like bracketed freight pricing, contract compliance alerts, and automatic workflows to update prices based on index changes. Furthermore, PROS made it possible to keep all contracts in Smart Price Optimization and Management, either in price lists or dedicated cubes, giving them the ability to automatically recalculate prices and begin the approval process when indexes change.
- Price Optimization. PROS Price Optimization works to measure customer willingness-to-pay (WTP) for both contract and spot sales. When integrated with PROS Platform, Smart Price Optimization sends price recommendations to be mediated with the same business rules, constraints, and guardrails set down by the pricing team. PROS also implemented a scenarios tab in pricing lists so teams can simulate different strategies and their possible outcomes, and then publish prices directly into SAP once a strategy is defined.
- Performance tracking. By implementing PROS Smart Price Optimization and Management, the ingredients manufacturer was able to visualize and analyze waterfall comparison, scatter plots, and bar charts so teams can accurately measure results against commitments. They can also now leverage Margin Drivers waterfall to reveal how margins evolve over the duration of a contract, providing more visibility into how they change on a period-by-period basis.
Before implementing the PROS Platform, our customer’s pricing practices were almost entirely manual. They wanted a more formal process operating on a centralized platform that would allow them to unify teams and be more strategic and efficient with their pricing methods.
Outcome #1: more efficient and agile pricing and quoting processes
- Shorter time to calculate prices, with spot and contract prices calculated online in minutes as opposed to days
- Ability to automate more portions of the quoting process, giving teams more time to spend on value-adding activities
- Faster corrective response to underperformers with automated coaching with Guidance and business rules recommendations
Outcome #2: a centralized, unified approach to pricing and selling
Before partnering with PROS, the pricing teams in South America were essentially handling many of the kinds of activities that sales would normally manage. An overlap of responsibilities made it difficult to define tasks and set standard procedures. Providing them with a single source of truth for their pricing and selling practices helped them focus on strategies specific to their areas of expertise.
Outcome #3: improved margins
The company’s previous lack of visibility into margin leakage made it difficult to strategize and operate for margin growth. Implementing the PROS Platform gave teams greater visibility into how their pricing practices contributed to revenue growth. They set a 5-year revenue goal of $25M to measure success. After implementing PROS, however, they were able to realize $18M within the first year.
Download the one pager or connect with an industry expert to learn more.