Pricing

Pricing Automation: It’s Time For Henry Ford

By James Marland
April 23, 2012

The Science Museum in London has a great collection of inventions from the 1880s. This one decade saw a tremendous burst in creativity as inventors unleashed products such as the typewriter, the bicycle, the phonograph, the camera and the automobile. But this burst of creativity did not filter down to the actual manufacture of products. It still remained in the realm of the craftsman, who served a long apprenticeship then developed his own methodologies and techniques to make what was asked of him. This process had not changed much since the age of medieval guilds. The outcome was that these stunning inventions remained the preserve of the rich.

Henry-Ford-next-to-Model-T-1921-From-the-Collections-of-The-Henry-FordBut one man had different idea: his name was Henry Ford. By developing the automated manufacturing plant he was able to make an efficient repeatable process, with standardized parts and little reliance on craftsmen. Now Ford certainly had some off-beat ideas (the recent book “Fordlandia” is a fascinating insight) but one outcome: his cars were for everyone.

So why do I feel that pricing is still in the Victorian Age? In the pricing world we still are dependent on the craftsman approach: a neat Excel Spreadsheet here, an Access Database there. Each person building his own tools and trying to solve the problem. The process of getting a price is slow and error prone, there is significant duplication of effort and opportunity for error is high.

It’s time to industrialize pricing. The production of prices should be seen in a similar way to the production of any other manufacture. If we look at a Hi Tech assembly line, products roll off the end in a repeatable fashion.

Do we pay as much attention to the efficiency of our pricing machine as we do to our product line? What about the quality of our prices? In our plants we have a variety of quality checks (Lean Manufacturing, TQM, 6-sigma), shouldn’t we be applying these to the “Production line of our Prices”?

Also, in any modern factory, the process of designing and making is carefully controlled and only a few people can make a change to a product.

 

But that’s usually not the case in the Pricing Factory, where just about anyone can make up their own price. Imagine the chaos if any employee could reach down on to your production line and fiddle with a product before it went out of the door. That’s effectively what we allow to our prices: all sorts of unauthorized and poorly informed hands touch and fiddle with them before they leave the building.

Who’s going to be the Henry Ford of Pricing?

 

– James Marland

 

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    James Marland

    James Marland is the Director of Business Consulting at Vendavo based in London. In this role he helps diagnose Pricing Opportunities and develops business cases for pricing projects with ROI models. James has been in the pricing software space for many years, both on the customer and supply chain side: so he has a view from “each side of the table”. Prior to his pricing career he was VP of Solutions at Ariba and has also spent 5 years at SAP America. He has a Bachelor of Science degree in Mathematics from the University of Southampton.