Blog, Pricing

Driving Value in Chemical Businesses with Commercial Excellence

By David Anderson
August 5, 2020

While there are distinct differences between commodity and specialty chemical business processes, it’s actually quite typical for every chemical business to share the same opportunities for driving value. The headline areas of focus include:

  • Raw material cost volatility
  • Costs-to-serve
  • Sales decision support
  • Price administration and price increase effectiveness
  • Customer & contract profitability
  • Inefficient commercial process

Give your business a boost in each of those key areas this way:

Manage Raw Material Volatility: Deploy pricing operations that promote agility & speed in price setting, including systems to automate, and pricing cascades that group products for lower effort in managing adjustments. Consider formula-based pricing to automate product and customer price adjustments automatically based on index or public commodity prices.

Track & Manage Cost-to-Serve: Look beyond accurate fixed and variable costs and address margin leakage due to freight/transportation, distribution, inventory, service, and payment terms costs. Account for these costs in pricing structures that provide incentives for good outcomes for your business.

Support Sales with Pricing Guidance: Move beyond basic pricing guidelines for sellers, and arm sellers with specific value and peer-based guidance that helps them understand specific customer context for negotiations in more granular ways. Deliver supporting data to sellers at the point-of-decision.

Improve Price Administration Effectiveness:  Invest in pricing operational capabilities that ease the effort required to execute changes, and focus your time and efforts on better, more targeted price increase strategies.

Model Customer & Contract Profitability:  Understand cost-to-serve with a focus on decision support, and support estimation of customer gross-to-net in a framework that enables simulation of multiple scenarios at low effort to sellers.

Automate your Commercial Processes to realize greater accuracy and efficiency.

Vendavo is the number one vendor for pricing and commercial process solutions across the chemical industry and we have the most customers and experience in deploying on SAP for businesses in this industry. We support the deployment of all the above best practices with our chemical industry customers. Give me a call if you would like us to help you drive value with these types of efforts.

To learn more about how we help chemical customers enhance productivity with a cloud-based commercial excellence solution, download the case study for Specialty chemicals.

  • chemicals industry , commercial excellence , pricing

    David Anderson

    David Anderson is a Boston-based Business Consultant with Vendavo. Since 2001 he has led and consulted on pricing & commercial process transformation at some of the world’s largest companies. After joining Vendavo in 2016, he has specialized on driving value & outcomes with Vendavo’s high tech, medical device, and process industry customers. Dave is a manufacturing process engineer by training (BS, MSE from Kettering, Purdue), and received his MBA from Harvard Business School.