Situation

  • Company had over 20,000 active SKUs with 90% of revenues generated by just 5,000 SKUs.
  • Wide range of healthcare products including continence aids, gloves, infection control, urology, wound care and general medical consumables.
  • Deep culture of cost plus mark up to set List prices in the system and customer net prices.
  • Sales executives able to set prices independently, leading to inconsistent price points in the market place.
  • Procurement team’s cherry picking lowest priced items from 3-4 suppliers causing margin erosion.

Outcome Required

  • Immediate EBIT gains from the Project Blackbird to develop proof of concept and confidence in algorithmic pricing
  • ? New pricing architecture to simplify the customer price generation
  • ? Engage a National Pricing manager and analysts team to build out pricing capability across the business.

Action Taken

  • 900 basis points of margin improvement driven by Project Blackbird SKU price optimisation project in the first 6 months PILOT program. EBIT gains of $1.0M on revenues of $11M and a further $4.3M EBIT on revenues of $75M
  • Development of new pricing strategy + structures using detailed mapping of the value drivers for each individual SKU to inform future price rise improvements.
  • New approach to selling on value using Customer Value Discovery program.
  • Development of National Pricing Manager role and team to manage pricing structure and margin expansion program under a centralised strategic function.
  • Development of a Pricing mastermind to support the centralised pricing management function
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