In a recent AMR Research Report, entitled “Price Management in Automotive,” AMR Research estimates that a lack of price management discipline for incentives, discounts, and parts contributes to an annual profit leakage of $5B across the industry. The report further reveals that across industries, price management projects deliver average benefits of $3M to $45M, with some projects delivering as much as $200M. These projects can raise revenue by 1% to 2%, gross margin by 10% to 15%, and contribution margin by up to 50%. Automotive companies can expect the same results.

One example of an automotive OEM achieving such results from Servigistics is cited in the report and states:

“One automotive OEM looked to its parts business to optimize prices, increase revenue, and maximize profitability. The parent company gave the parts group a goal of raising revenue by 4%. The parts business turned to price optimization technology to help identify price increase opportunities.

They analyzed the 300 parts and identified several opportunities to raise the price on parts that were out of warranty and in high demand. They also uncovered opportunities where no commensurate competitive part was available and raised those prices. Other opportunities were found as well. Using technology from Servigistics, they were able to have one pricing analyst review the data and make the price moves.

As a result, the parts division of this company was able to recognize a 16% increase in revenue from the parts business, the majority of which was attributed to the price optimization project.”

“Servigistics Pricing offers proven revenue and profitability opportunities for automotive OEMs as well as other leading manufacturing companies,” said Eric Hinkle, Servigistics CEO. “AMR Research’s report is timely, and confirms the experience of our clients. It is one of many recent reports highlighting the value and importance of disciplined service parts pricing management and optimization.”

Servigistics Pricing combines proven strategic pricing methodologies, advanced optimization techniques, market adaptive business logic, and a global, multi-language, multi-currency open architecture to provide a comprehensive service parts pricing solution. Operating interactively from a Web browser, Servigistics Pricing uses historical part data, part characteristics and market information to apply pricing strategies and recommend optimal selling prices to balance competitiveness with maximized gross margins. Pricing strategies can be modeled and executed automatically with exception-based functionality. Configurable workflow extends the value to those outside pricing but interested in price and volume performance, supporting virtually any global organization.

Servigistics Pricing clients typically achieve 10-20% improvements in gross margins, along with stronger negotiating positions with suppliers, coordinated pricing decisions across all levels of the organization, visibility into market changes, improved control over warranty expenses, and identification of undervalued parts.

A complimentary copy of the AMR Research Report, “Price Management in Automotive,” is available from Servigistics at http://www.servigistics.com/whitepaper7.htm