A business can use a variety of pricing strategies when selling a product or service. The Price can be set to maximize profitability for each unit sold or from the market overall. It can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Businesses may benefit from lowering or raising prices, depending on the needs and behaviors of customers and clients in the particular market. Finding the right pricing strategy is an important element in running a successful business.

1. Shahista KARIM 14140896
Cynthia SHONTAN 14137935
Kaan AYDIN ATAOGLU 14123053
Choothan THAMMAPALO 14135090
Meykandan KRISHNAN 14135265
Procurement Case study :
Company A
Operations and Supply chain management

2. Table of contents
 Company Background
 Theory of pricing policy
 Identify a recognized pricing point
 How to protect Company A from the price
fluctuation
 Streamline or Reduce the processing time
How to protect Company A from pilfering of scrap
How to protect Company A from Risk of RTA
How to protect Company A from High cost of
implementation
How to protect Company A from incorrect weight
advised from off-site weighing

3. Background Operations and SCM
Company A
 1st tier automotive supplier of metal pressings and assemblies
 It produces 1million parts every year to single global OEM
 The company uses a 25-30ft lorry full of parts to deliver to single
global OEM every 14minutes
 Company A ensures that their operations in distribution are
always effective and on time as they will be charged a levy for line
stoppage.
 The company has a policy of working 24 hours from Mon-Fri so
as to make ends meet for their clients
 The main material the company uses is steel coil, approximately
1500 tonnes is used per month

4. Operations
 The result of the steel material used produces a waste scrap
 The company gets an amount of 733 tonnes waste(scrap
material) from the manufacturing of the steel coil.
 The waste gotten is called “Slugs and Cuttings” and it has a
specific cutting of 150mm * 50mm(1cm in diameter)
 The waste scrap is deposited onto a conveyor belt
 This waste scrap is then taken to a “scrap house” which is
adjacent to the factory and contains 2 large and 1 small trailers.
 There are 2-3 collections per day during normal daylight hours
 The company then supplies the clean scrap which is generally
called 8A in the market to recyclers in demand due to the form
of materials compacted which can be used in foundries

5. • about the product they are selling (
Conduct some research on the market
reaction to the products provided)
• Is there an established market price for
similar products? And market
expectations?
• Demand in terms of quality and quantity
What does
the market
say?
• The price of the product will depend on the
competition, what are their prices, their costs?
• What are the key features and benefits of their
products?
• Does company A products have a clear point of
difference or competitive advantage over
competitors
Who are my
competitors?
What do they
do ?
PRICING POLICY : Market and
Competitors

6. PRICING POINT : Selecting the
pricing objective
Survival
Objective
• To Cover the
cost,
especially the
variable cost
• Price low to
stay in the
market
Profit
Objective
• To choose
price that
makes
maximum
profit
• Set a return
(a % on the
cost)
Volume
Objective
• To increase
sales volume
• Maintain the
market share
or increase
• Can be an
obstacle for
competitor
Quality
Objective
• High price to
cover Quality
cost, R&D,
Branding
• Develop and
keep an
identity about
the quality,
the
exclusivity

7. IDENTIFY A RECOGNISED PRICING
POINT : Defining the pricing strategy
ECONOMY
PENETRATIO
N
SKIMMING PREMIUM
HIGH
QUALITY
LOW
QUALITY
HIGH PRICE
LOW PRICE
VOLUME
VOLUME
PROFIT
PROFIT

8. IDENTIFY A RECOGNISED PRICING
POINT : Choosing a pricing method
 Cost-Plus: Production costs are clearly defined and
then a target profit margin is added to make the final
price.
 Targeted Return: Investment costs are determined,
and a specific rate of return is applied in order to get
the return on investment.
 Value: Build a price based on the value it creates for
the customers
 Psychology: Psychological or emotional impact is

9. To protect the company from
extreme price fluctuations
 Company A needs to have an agreed contract with the
recyclers on a standard price for the weighted scraps
regardless of the price fluctuation in the economy.
 The company can also set up a warehouse to store the
scraps in the case of low pricing system and whenever
there is inflation the company can decide to take it to the
recyclers.
 They could also purchase a weighting machine to measure
the amount of the waste scrap and sell it when the price of
the economy is favorable.
 Furthermore, the company can source for investors that
will be able to forecast the pricing rate for the waste scrap
in future times depending on the economy of the market.

10. STREAMLINE/REDUCE THE
PROCESSING TIME
Raw
Materials
Sorting
Scrap
Storage
Transport
Recycler
Melting
Cutting
Cooling
Finished
goods
Quality
control
Transport
Manufacture
rs
WASTE
Moulding

11. STREAMLINE/REDUCE THE
PROCESSING TIME:
1) STANDARDISATION
CUTTING
MELTING
Team 1 Team 2 Team 3
Melting Melting Melting
Cooling Cooling Cooling
Cutting Cutting Cutting
• Identify waste in the
process
• Study the process
• Analysis
• Implement efficient
activities
• Monitor the activities
2) AUTOMATION

12. Automation
 Automation is used to get rid to monotonous
tasks.
 Saves resources for the company.
 Reduces manual errors.
Investment in new technology
 Feasibility study.
 Return on Investment.
 Sustain in the market.

13. Protect Company A from pilfering
of scrap
 The company needs to set up security measures by
acquiring a warehouse which uses locks and is well
lighted to be able to store the scrap by using CCTV
(Security Cameras, Alarms or Motion Detectors).
 They should ensure that all landscaping pathway that
allows criminals to hide from view of the company
must be removed.
 Installation of exterior lighting and protect fixtures with
locked metal cages should be increased.

14. Protect Company A from Risk of
Road Traffic Act Fines (RTA)
 Ensure the designated drivers follow a rule which is to reduce vehicle
speed using GPS.
 Decrease idle time using GPS tracker
 Install a GPS in all Lorries which serves a purpose of improving routing
and dispatching.
 Make sure there is proper vehicle maintenance in order to prevent line
stoppage and implement fuel card integration.
 Since the company works round the clock, there is a possibility that the
workers will be experiencing fatigue and this can lead to accidents, in
order to prevent this there should be shifts between the drivers and those
working in the manufacturing company.
 In addition, the company needs to get a warehouse close to the company
(Single global OEM) that needs the steel. In this way the assigned Lorries
delivers materials to the warehouse and whenever the single global OEM

15. Protect Company A from High
Cost Implementation
The company can be protected from spending too much
by following the below steps
 Create a budget plan to know what the company needs
in order of priority
 Source for various suppliers that can offer the raw
materials company A needs at a lower cost
 Create a balance sheet to keep records of the expenses
spent so as to be able to detect/monitor the amount of
money spent on a particular thing if it’s over the budget
or lower.

16. weights advised from off-site
weighing
Multi Point Weighing:
1. The dry weight of the truck is determined by the on sight
weighing bridge.
2. The weight of the fully loaded truck will be weighed on sight
to determine the weight of scrap.
3. The fully loaded truck is again weighed by a 3rd party weigh
bride agreed by both the companies.
4. The weight of scrap in the receipt note from the recycler
should match with the values determined by the on sight and
3rd party weigh bridge.
5. If the machine on sight is faulty, the weight on the receipt
note should at least match with the weight provided by the
3rd party company.

17. Action plan for the project
Receiving Raw
material
Sorting
Melting
Cutting
Scrap
Storage
Transport to the
recycler
Moulding
Cooling
Quality control
Transport to
the warehouse
TIME
Energy
saved
to Improve efficiency in each
of the primary processes
within 1 year by 10%
PRIMARY
PROCESS
SECONDARY
PROCESS

18. References
 Encyclopedia of business, 2nded (2013). Pricing policy and
strategy. Available at:
http://www.referenceforbusiness.com/management/or-
pr/pricing-policy-and-strategy.html. [Accessed 13 November
2014]
 Ian Baker Moodle course on Pricing Strategies. Available at
: http://moodle.bcu.ac.uk/course/view.php?id=5777
[Accessed 18 November 2014]
 Nab (2010) How to develop a pricing strategy. Available at:
http://learn.nab.com.au/how-to-develop-a-pricing-strategy.
[Accessed 13 November 2014]
 Princing methods
http://entrepreneurs.about.com/od/salesmarketing/a/pricing
strategy_2.htm [Accessed 17 November 2014]
 RTA

19. Any questions ?