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Price Modelling for the automotive industry

A case study in pricing analysis
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Our client is an affiliate of one of the world’s leading automotive manufacturers. In this case study we explore how we delivered a comprehensive Parts and Accessories price modelling solution to support accurate and efficient pricing for over 370,000 component parts.

The Challenge

Our client’s national Parts and Accessories Division is highly profitable, accounting for a significant proportion of the organisation’s overall profitability. The division is responsible for managing prices for over 370,000 parts and accessories. Managing prices for such a large catalogue is both time consuming and manually intensive. However it is critical that pricing is carefully controlled, and that decision making is both transparent and traceable. Our client is also required to integrate with a global system that is transactional in nature and limited in its ability to support analysis.
The situation:

  • Pricing was being managed using Excel workbooks. The reference data was downloaded from the core analytical systems into workbooks with embedded macros and formulas. To manage the complexity, the workbooks significantly simplified the business rules.
  • Each price-setting exercise also started from scratch: There was no central repository of previous price setting exercises other than a file share. Once price settings were ratified they were manually copied from the Workbook into the global system.

Our challenge was to improve the way of working and provide a platform to enable efficient, accurate price modelling and a controlled price setting. The solution also had to incorporate business rules and support several common types of analysis.

The Solution

Our solution is built using BPC Embedded – SAP flagship solution for performance management and running on SAP HANA platform. Developed in partnership with our client’s price management team, it forms a comprehensive price modelling application. It allows users to model prices flexibly across the full catalogue of product. Business rules and workflow have been integrated into the solution and analysts can now very easily analyse and report the impact of proposed changes at both a detailed and aggregate level without losing the accountability.

For the first time the Parts and Accessories Division has a tool which fully integrates with the organisation’s global systems. Business rules are formally encoded in the application logic and the solution is scalable so that a large number of parts can be modelled efficiently.

The solution offers the following capabilities

Functional:

  • What-if Pricing Modelling: Planning scenarios that compare price options and evaluate the up / down stream business impact.
  • Built-in profit margin calculation: Profit margin calculation supported by automated price calculation.
  • Self-service and responsibility: Raise business adoption by providing them with an easy to use tool and a guided business process work flow.

Technical:

  • BPC Embedded: Direct write back of price model data into HANA. Leveraging organisation master data, maintaining data integrity and consistency across enterprise.
  • Run on HANA: Pushing sluggish processes that runs traditionally on application server directly to the in-memory database. Allowing complex calculation to run faster and improve the reporting / planning performance.
  • Real-time Integration – Integrates vehicle sales data in real-time through HANA and SLT.

Future Plans

The price modelling tool will be used to analyse and validate price changes before they are drawn into the global system. There is also scope for the modelling solution to be extended with more sophisticated outputs including:

  • Automation of alerts such as when sales for a part have slowed or where a part price is not competitive with the market
  • Gross Profit modelling based on sales forecasts and price elasticity
  • Price optimisation

The big picture benefit will be realised by leveraging the data foundation to analysis the relationships and interdependencies between different operating divisions.

It will be possible to analyse the overall cost to a consumer across Vehicle, Parts and Servicing divisions and assure each division is aligned with a shared marketing strategy. It will be possible to evaluate a consumer’s lifetime value, and potentially track the lifecycle of the consumer experience and tailor sales and marketing activity to the individual.

Let’s Talk.

Analytics8 is an Australian-based analytics, business intelligence and data warehousing consultancy founded in 2002. Our vendor-agnostic team of 60+ consultants has deep expertise and implementation experience. We specialise in design, development and deployment of effective data solutions. 
Talk to us about how we can improve price modelling within your business.

enquiries@analytics8.com.au

Sydney: +61 2 9299 4430

Melbourne: +61 3 8605 4880

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Sydney:

Level 4

350 Kent Street,

Sydney, NSW, 2000

+61 2 9299 4430

Melbourne:

Level 8,

350 Collins Street,

Melbourne, VIC, 3000

+61 3 8605 4880

Not based in Australia? Our team in the UK or the US would be happy to help.