Dynamic pricing for chemical manufacturer
The adoption of dynamic pricing requires the transformation of the whole business organization of chemical manufacturers in three parts. The first is the change of pricing tools and systems, the second is the change of pricing organization and process. Third, it requires the change of thinking mode, behavior and ability from top management to front-line sales staff.
Tools and systems
In order to ensure the successful implementation and sustainability of dynamic pricing impact, enterprises must have appropriate it, analytical infrastructure and performance management capabilities. The first step is to make a comprehensive inventory of all the company's customer account data and price data, which can be processed by analysis tools. Which analysis method to choose depends on the specific situation of the chemical manufacturer.
Chemical companies differentiate products, which can use a mapping based pricing method, customer purchase factors, such as the product creates value for customers, customer value how much trust supplier's supply security critical chemical process, on the contrary, customer's preparation to change suppliers. These factors are quantified, and then the algorithm can group customers whose purchases can be priced in a similar way. For chemical companies, it has been a long-standing practice to adopt the "second best choice" (NBA) 2 pricing method, because their biggest customers buy differentiated products with unique attributes. Advanced analysis enables the NBA's approach to extend to hundreds of customers, including small customers, and use it to inform pricing and gain more profits.
As a part of the implementation of dynamic pricing, chemical manufacturer can also bring stronger market intelligence and greater predictability of downstream market demand and upstream supply to improve their pricing strategies. In view of the sensitivity of the chemical industry to oil and gas price fluctuations and supply chain disruption, this is particularly important in the chemical industry.
A large amount of information can be collected and analyzed, from "big picture" elements, such as crude oil market, to detailed market information. The latter includes news about trade flows, competitor disruptions or capacity increases, as well as developments in customer industries, such as regional construction trends and consumer preferences for different types of vehicles. You can also learn more about the producer cost curve for a specific product: if a competitor's factory is shut down, you can assess its impact on the overall supply and demand situation, and carefully assess the potential for price adjustment.
Advanced analytical methods work with all of these strategic and data inputs, which form the price management engine.
Change organization and process
Among chemical manufacturers, the digital and advanced analytical skills required to develop and maintain dynamic pricing methods require the establishment of a dedicated pricing unit - whether regional or global, depending on their business profile. This new dedicated unit or office will be the home of the company's pricing experts, who can guide the overall pricing strategy and specific pricing measures, and advise the sales organization on the use of new tools. Pricing experts will include new roles such as experienced salespeople and data scientists within the company.
Pricing units need to establish clear pricing procedures, starting from market intelligence and market price forecast, and ending with detailed dynamic pricing suggestions, actions and implementation monitoring. Pricing experts also need to integrate the structure of pricing performance management, and track the basic indicators of price target, profit and growth.
In terms of dynamic pricing, the most successful chemical manufacturers maintain a healthy balance between the expertise of the analysis and sales teams, with each team learning from each other to enhance the overall understanding of the market and customers for the best results. "I didn't know this factor was so relevant to these customers," is a new insight we often hear from the sales team when we see the data. Conversely, if the analysis results are out of sync with the actual situation of the market, the sales team can quickly point out this. All of these show that digital analysis cannot and will not replace sales representatives, but will be able to support faster, more fact based decisions by front-line sales staff.
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The covid-19 pandemic has had an unprecedented impact on the U.S. economy and the state of the chemical industry.
Although the industry has faced cyclical challenges such as overcapacity, price pressure and trade uncertainty before 2020, many changes after the pandemic show structural or destructive characteristics.
American chemical manufacturer has responded to the crisis by focusing on operational efficiency, asset optimization and cost management.In order to achieve success in R & D of chemical industry, the company should consider a series of strategies (such as key technologies) in the market.
However, it means that companies may continue to focus too much on new business models and applications in the short term, which may eventually lead to too much attention to new growth.A key aspect of dealing with this disruption in 2021 will be to understand which customer behavior is temporary and which is permanent, as recovery in different end markets and regions may be uneven.
Companies can address this uncertainty by revisiting their product portfolio and conducting robust scenario planning with unknown factors.
Therefore, in addition to cost optimization and capital constraints, industry participants may respond to changing demand by giving priority to growing end markets such as healthcare and electronics.Policy recommendations related to regulation, trade and sustainability can have a significant impactThe new government has promised to reassess industrial tariffs because Trump's campaign believes that tariffs are a less effective trade tool than other measures such as alliances and alliances.
Outlook 2030 outlines the emerging challenges, analyzes the current positioning, and emphasizes the need for the European chemical industry to position itself to stay ahead of the game.Attracted by Asian economic growth and market opportunities, Europe's value chain is moving eastward, and the European chemical manufacturer is facing major challenges.
A new environment with more fierce competition is taking shape, and state-owned enterprises and emerging chemical giants are emerging.
Fragile economic conditions require management of volatility in a competitive environment where trade flows gradually change direction.
Understanding what these challenges mean, and more importantly, determining the right strategic choice to thrive in this new competitive environment is the top priority of every chemical company’s executives.Since the mid-1980s, the global chemical industry has grown at an annual rate of 7%, reaching 2.4 trillion euros in 2010.
If current trends continue, the global chemical market is expected to grow by an average of 3% in the next 20 years, mainly driven by major players in Asia and the Middle East.
Today, Asia accounts for almost half of global chemical sales.Taking into account the stability, slowness and linear development of the European chemical industry to a certain extent, the "ruler strategy" is likely to be applicable in the next 20 years.
The second is that digitization may affect the demand pattern of the final market, which has an impact on the chemical manufacturer's value chain.
Achieve new levels of functional excellenceChemical companies' business processes, including manufacturing, marketing and sales, and research and development, provide opportunities for performance improvement based on data capture and interpretation.
Manufacturing is one of the largest and most accessible areas of opportunity, spanning all sectors of the chemical manufacturer, from petrochemicals to pesticides.
By adopting digital technology in our production operations, we see the potential to increase ROE by 3 to 5 percent.
Instead, managers should collect and interpret the data to reveal ways to achieve higher yields and throughput, lower energy consumption, and more efficient maintenance.
For many companies, these goals can be easily achieved using existing IT and process control systems, while companies that expand the types of data they collect may benefit more.
