Dean L. Gough EMEA & ASIA PAC Pricing Process - Cummins

Dean L. Gough
EMEA & ASIA PAC
Pricing Process
Cummins Power Generation
Global Commercial Products

2
EMEA & ASIA PAC Pricing Process
Objective:
Deliverables:
Project
Team:
To Define & Implement a common Pricing process / Price List
for EMEA & Asia Pac distributors.
� Process which reduces List price variations across regions / plants.
� Common Price list / Process
� Optimize / Rationalize Option List Prices.
� Align Pricing proposal with SOLAR requirements
Scope: � Singapore plant
� Kent Plant
� India Plant
Belt: Dean Gough
Sponsor: Antonio Leitao
Controller: Nickson Yee /Andrew Whitehead
MBB: Barry Henderson
Team members: Julian Carrasco, Yee Soon Lim, Kelly Fretwell,
Satish Jayram, Micah Cook, P.Sathya Veerappan (parallel project)

3
Project Background
���������������������
$ $ � $
$
���������������
� Distributors have access to 4 completely different price lists.
� Similar Gensets available across plants with different List prices .
� Similar Gensets – Different Base Specification based on source plant
� The same distributor needs to trade in different currency based on source plant
-European distributors order in Euros from Kent ,USD from Singapore & India plant
� Different methods for discounting options
� Different pricing approval / release process across regions

4
Methodology
After review of project scope and Project complexity –
Process Redesign Road Map
DISCUSSION GUIDE
STAKEHOLDER
VOC/VOB
FMEA to identify the
potential challenges /
gap in achieving the
project objective
TRANSLATION &
IMAGE KJ
REQUIREMENTS
ANALYSIS
� 24 different Failure Modes
were identified.
� Key points are differences in
– Base Genset specifications.
– Options description
– Option discout structure.
– US$ & Euro price list.
– Genset Nomenclature.
The outputs from the FMEA were taken
into consideration for preparing the
Interview guide for the VOC / VOB
LEAN PROCESS
PROCESS
REDESIGN
TRANSITIONS PLANS
TRAIL PROCESS
SOLUTION DESIGN

5
Requirements Analysis
Objective Suggested Questions Pointers
What are your views on the current process we use for determing and
releasing List prices / Price List
Too messy with Asia Pac & EMEA having different list prices
and releasing prices
Process to determine In your view what works well in this process
at different times
The region would be able to communicate the prices changes to
the market
Single List Price for the
Same list prices for the same Genset models, irrespective of the
Base Genset In your view what are the areas of improvement in the process source plant
What are your views if the same genset ( base genset )has the same Great for HHP models., but would differentiating lower nodes
list prices across all plants and price changes
on list prices are done at the same time
What are the road blocks if any you envisage if having a same List
prices for the same Base Genset
would be difficult
What are your views on the current process we use in our region to Pricing analyst proposing price based on previous transactions
determine Distributor Net prices
and regional leaders providing their inputs
In your view what works well in this process Have a feel for the Gross Margin for the base genset
In your view what are the areas of improvement in the process Have a comparison on the Market prices
Process on
Have a view on the Gross margin for the complete set i.e Base
determining Distributor
set & options
Net Prices
What are your views if are DN prices are derived based on the Market
prices we Interview have in the Price Trackker guide for
What are the road blocks if any you envisage in having a process,
where in which DN prices are primarily based on definite definite
Market prices
What are your views on how Option prices are being structured in our There is a possibility of the same option having different DN
price list currently
price
VOC/VOB experience
In your view what works well in this process
In your views what are the areas of improvement in the process
Optimizing Option
What are your views on having same options prices across all the
prices
plants
What are the road blocks if any you envisage in having a process
our where in which the stakeholders same options across all the plants world
having the same list price
If we are to implement a common pricing process across EMEA & Asia
Pac, in your view what are the identified
Misc barriers
If you are to design / define this common pricing proces, what would
your recommendation be?
DISCUSSION GUIDE
STAKEHOLDER
VOC/VOB
Customer
selection
Matrix
TRANSLATION &
IMAGE KJ
REQUIREMENTS
ANALYSIS
Customer Voice:
1. From this project we should have a clear pricing policy
i.e release date, effective dates of the price list, pricing strategy –
have to be clear
Any KJ Images:
Not very good always errors,
No time allocated properly for the list to be tested.
Too many mistakes
Summary: Customer Requirement(s)/Needs(s):
Need for a robust
process for
future release of
price lists
LEAN PROCESS
PROCESS
REDESIGN
Common pricing process across plants to
determine DN price
Transfer Images to voices
using translation
worksheets:
TRANSITIONS PLANS
TRAIL PROCESS
SOLUTION DESIGN

6
VOC Requirements
KJ
CSD at all plants need to
have same process and
response times
Make sure we understand the
maintenance implications and detailed
change management process for each
process option
Make the price list on
time and error free
We require a single price
announcement for prices
from all our plants
Common order
management system for
order entry across all
plants
Nee to ensure the orders can be
entered. No conflict with KBC in
Kent make sure it works for
order processing in all plants
It means same order process
in all the plants. Would our
manufacturing plant agree to
this?
We require a common process across plants in
determining list prices
Use current Kent format similar
style and include some
automation. Understand model
availability and why we use
Singapore models or Kent
DISCUSSION GUIDE
STAKEHOLDER
VOC/VOB
The base Genset specification and options
available should be the same irrespective
of the source plant
If we have the same list prices, then
this would lead to having common DN
price. The reasoning is we have
different cost structures across plants
and our margins will vary. I understand
prices is based on market requirement,
but as business leaders we are
responsible for margins
Too many time
pressures which leads
to mistakes
TRANSLATION &
IMAGE KJ
REQUIREMENTS
ANALYSIS
5
QFD
Rating as 9, 3 , 1
Blue Level
Common pricing
process across plants
to determine DN prices
Options should be
defined based on
market requirements
Require a common
order entry process
across all powergen
plants
Require a common
process in defining /
releasing List prices
across all regions
Red Level
We need process to validate our market
pricing data
In the new process we should have clear
visibility on the margins for the options
Require a clear
process in determining
option pricing
Actively manage option pricing
Consistent process across all CSD
groups
Common order change process across all
powergen plants
The price lists to be released in a similar
process across all regions
Formulate Price list format similar to
Powerquote features
Customer requires that the Single price
list should ensure that the transition to
Solar should be smooth with no changes
in Net Prices
The Single price list
should ensure a
The new process should ensure minimum
smooth transition with
impact to the announced DN prices
SOLAR
Customer Needs (Black Level)
Maximize, Minimize, or Target
Functional Product Requirements
T T T T T T T T T T T T T T T Competitive Products
Price trackker is only an input, we cannot be
basing our prices only on that basis. There
are more things to consider whether we are
No.1 & No.2 position and we should
determine prices based on that
We shouldn't be following market prices we
have to "set' prices
At present the DN pricing is being computed
analyzed differently by various regions
We donot have a consistent process to
compute DN pricing both for Dollar & Euro
distributors
We receive market prices from various
sources we need to develop a process to
consolidate them
The pricing data provided by the distributor
doesn't really mean they are valid market
prices
We have to determien the options which are
available in PGS, Kent & other powergen
plants
We have options in our price lists which are
in the price lists due to legacy
Distributor perception will be that they get
the same option for the same price. Need to
differentiate parts
Option prices are historical and we are
unsure of the margins
Make sure (option pricing) are bein
maintained and properly priced ( market
pricing)
Our option pricing now are internally
focussed i.e what is easy for the factory, not
on what is important for our customer
We must know which options are most
profitable and must actively manage those
CSD at all plants need to have same
process and response times
Make sure we understand the maintenance
implications and detailed change
management process for each process
option
Need to ensure the orders can be ordered.
No conflict with KBC in Kent make sure it
works for order processing in all plants
� Common Process to Determine DN prices
� Common Process to Determine Option prices
� Common Process to Convert US$ / Euro prices
� Common Process in Releasing List Prices
� Similar Discounting Principle
LEAN PROCESS
PROCESS
REDESIGN
We do not really want to rely on market
data alone when we set prices
Process to determine prices to be
common across plants with detailed
ownership
We need to combine then rationalize
options based on data
Importance Rating (Customer
Prioritization)
Common process to determine DN prices
Common process to determine Option List prices
Common process to convert US$ to Euro
Common process in releasing List prices
Similar Discounting principle
All pricing information in single location
All competitor pricing in single location
Consistent process in costing of Base Genset
Consistent process in determing option costing
Common Nomenclature across all Genset plants
All options available across all Genset plants
Consistent process in determing Market DN prices
4 3 3 3 3 3 3 3 3 3 3 3 3 3
3 9 3 3 3 3 3 3 3 3 3 3 3 3
9 3 3 9 3 3 3 3 3 3 3 3 3 3
6 9 9 9 3 3 3 3 3 3 3 3 3 3
3 3 3 3 3 3 3 3 3 3 3 3 1 3
3 3 3 3 3 3 1 1 3 3 3 3 1 3
6 3 3 3 3 3 1 1 3 3 3 9 1 3
3 3 3 3 3 3 1 1 3 3 3 9 1 3
1 3 3 3 3 3 1 1 3 3 3 9 3 3
5 3 9 9 3 3 3 3 3 3 3 3 3 3
9 3 9 9 3 3 3 3 3 3 3 3 3 3
8 3 9 3 3 3 3 3 3 3 3 3 3 3
6 3 9 9 3 3 3 3 3 3 3 3 0 3
7 3 3 3 9 3 0 0 3 3 3 3 0 3
6 3 3 3 9 3 0 0 3 3 3 3 0 3
4 3 3 3 9 3 0 0 3 3 3 1 0 3
It means same order process in all the
plants. Would our manufacturing plants
3 3 3 3 9 3 0 0 3 3 3 1 0 3
agree to this?
Make the price list on time & error free 6 9 3 3 3 3 0 0 3 3 3 0 0 3
We require a single price announcement for
7 9 3 3 9 3 0 0 3 3 3 0 0 3
prices from all our plants
Too many time pressures which leads to
6 3 3 3 9 3 0 0 3 3 3 0 0 3
mistakes
The base genset specification and options
available should be the same irrespective of 5 9 3 3 3 9 0 0 3 3 3 3 0 3
the source plant
Use current Kent format similar style and
include some automation. Understand
6 9 9 9 3 9 0 0 3 3 3 3 0 3
model availability and why we use
Singapore models or Kent
If we have the same list prices then this
9 9 3 3 3 9 0 0 3 3 3 3 0 3
would lead to having common DN prices.
Alignment with Solar with 1 price change 9 9 9 9 9 9 0 0 0 0 3 3 0 0
Less differences between Current DN and
new DN prices
If we make any changes to list prices
without fully understanding distributor's use
of the list prices, we may cause problems
and get backlash
6 9 9 9 9 3 0 0 0 0 3 3 0 0
5 9 9 3 3 9 0 0 0 0 3 3 0 0
In the new process, the DN prices should
have minimum impact as we have already
3 9 9 9 9 9 0 0 0 0 1 3 0 0
revised our prices twice in 2008
Our distributors should be trained on the
new process so they have minimum impact
1 3 3 3 3 9 0 0 0 1 3 0
during transition
Relative Importance (Priorities) 837 825 801 753 675 172 172 375 375 439 436 150 375
Our Product (Singapore GOMS)
Competitve
Benchmarks
Target Range (with Units)
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Process Deliverable
Common process in Market option pricing
Process Deliverable
Process Deliverable
Process Deliverable
TRANSITIONS PLANS
TRAIL PROCESS
SOLUTION DESIGN

7
Implementation Plan
� Price List Base Genset specifications will be as per the agreed
specifications which was part of the SOLAR pre-work.
� If SOLAR provides for an option to be deselected, the option will be
provided with a Price reduction selection
� Only a single conversion factor can be used from $ - � ($ is the base line)
� Only 1 discount factor applied across options and base genset.
� "Similar" products from cross source plant have the same LIST price.
� Distributor friendly tool to increase cross plant sourcing
DISCUSSION GUIDE
STAKEHOLDER
VOC/VOB
TRANSLATION &
IMAGE KJ
REQUIREMENTS
ANALYSIS
LEAN PROCESS
PROCESS
REDESIGN
TRANSITIONS PLANS
TRAIL PROCESS
SOLUTION DESIGN

8
Solution Design
Requirement
QFD
Process to Determine
DN prices
Common Process to
Convert US$ / Euro
prices
Common Process to
Determine Option prices
Process to Determine
DN prices
Common Process in
Releasing List Prices
Issue / Challenge
Multiple price lists , in various excel
formats with different list pricing and
discount rules.
We can only have a single $ - �
conversion factor. With no further
adjustment for currency conversion.
Minimal impact to distributor
current DN.
Solar requirement of Base Genset
specification for preconfigured build
Euro Customers currently transact
as follows –
Kent - � , PGS -$ and India $
Alignment of EMEA & Asia Pac
pricing process. With common
reviews and release.
Solution
Implemented
Introduce new single global price
list. PQ2009 to cover UK, India,
GTEC and Singapore
Use discounts tool to maintain
single discount from list. Adjust
option pricing to align for 1
discount
Change our Std Base Build
offering of price list to match
already defined SOLAR Base Build
Pricing tool with conversion factor
to achieve current DN from all
plants. With minimal impact ton
distributor pricing
Price process and Price review
proposal. Introduce new rules on
price changes for EMEA & APAC
VIEW
SLIDE 17
Link removed
SLIDE 18
Link removed
Link Removed

9
1.
2.
3.
4.
5.
Key Action Items
No Actions
Implementation
View
Communication at powergen council and
ADAC meeting.
Communication to Distributors of new
Power Quote Version. BDM meetings to
ensure consistent message to distribution
Price List Pilot (BDM + selected PG
leaders) .
Provide clear instruction on how to
manage transition of price lists
Communicate New discounts to all
OMCS Teams
Presentation slides presented at both meetings.
Ensure distributor leadership understands why we
are changing.
Marketing Bulletin to distributors with explanation
of new discounting principal. Ensure all BDM’s are
well aware of the reasons
Use trial period to log all necessary changes for
future price release. Second revision is due for
release Feb 2009 after feedback.
Current acknowledged orders will remain with
price (+ current announced increase) and
specification . All new orders will be in line with
new std specification from release date
Creation of Macro based tool to select distributor
plant, main source plant and payment terms.
Release and document control.
Link Removed
Link Removed
Link Removed

10
Benefits / Savings
Savings as a result of project
� Additional specification in Base Genset
Model for the Gensets sourced from
Singapore & India plant in 2009.
� For each commercial region, the standard
Base Genset increased. More value and
ultimately more revenue per product sold
Benefits to the Business
Future Projects
Proposed a SFSS project - this to
work with Supplier to have the best
value and fit for purpose part across
our global products.
Significant Cost differential between
Kent and Singapore for “similar”
components
Base Genset specifications across all the plants ,changed to be in line
with Solar std specifications. Distributors understand and accept new
base specification.
Created a base US Dollar price list, and created Euro price list with a
single conversion factor , the discount factors for the Euro had minimum
change in the communicated DN prices
Created a pricing tool to ensure similar Gensets of different Genset
nomenclature had same List prices & discount factors.

11
Positioning the Solution – Evolution
- Low
Complexity
One price list, same
discount
Product Discounts
Across less
product groups
IT COMPLEXITY
PRICING SOLUTION
+ Unique Price
per distributor
rationalisation
- Same price all
distributors
SINGLE PRICE
LIST
$ Based
Kent $
Kent �
Sing $
India $
• Rationalise options
• Consolidate LIST PRICE
• Understand price position
+
Complex
IT
Solution
WHERE WE
ARE TODAY

12
Acknowledgement
Team: Special thanks for the hard work
Key to the success of this projects was running a
Parallel Project led by P.Sathya Veerapan.
Julian Carrasco for the additional Macro work required for the
Excel tools.
Yee Soon Lim for Asia Pac local pricing work and computing &
consolidating the pricing tool.
Kelly Fretwell for EMEA pricing inputs
Peter Horton for overall strategy and positioning
Micah Cook and Satish Jayram for keeping us connected
with SOLAR
Sponsor: Antonio Leitao
MBB: Barry Henderson