Achieving Transparency, Efficiency and Gains: Sonae Arauco's Pricing Journey

Sonae Arauco operates in the paper and forest product manufacturing industry. Established in 2016, Sonae Arauco is an alliance between Sonae Indústria and Arauco, sharing ambitions for international growth and long-term business vision focused on people and a better planet.

Sonae Arauco is one of the largest wood-based solutions players in the world. The company’s commitment to sustainable development is evident in its forest certification, the implementation of a circular bioeconomic model, and the continuous integration of recycled wood into the industrial process.

Since its inception, Sonae Arauco has focused on developing sustainable wood solutions with high-added value for furniture, interior design, and construction, from the most standard to the most demanding from a technical point of view.

Sonae Arauco sells products to 80 different countries, serving more than 1.000 customers and handles over 50.000 SKUs. They have been working with Pricefx since the beginning of 2020.

In 2018, a detailed assessment of their pricing maturity revealed the necessity for a comprehensive pricing transformation. They needed to introduce significant improvements to quickly respond to pricing challenges in a dynamic industry.

Sonae Arauco needed to establish a pricing framework to enhance visibility and transparency. To achieve this, the company was required to:

• Introduce new pricing processes with clearly defined roles, responsibilities, and pricing committees.

• Implement a rule-based logic for price determination based on product attributes, with mark-ups on top of a predefined reference product.

• Systemize commercial terms to ensure client consistency, including corrections to preceding pricing practices and resolving inconsistencies between price dispersion and target prices, and

• Control and manage price leakages along with other aspects of pricing.

As time went on, the company found that negotiating contracts became increasingly time-consuming. The customer handled each client individually, wasting hours and risking errors that frustrated their teams and clients. They often had hundreds of lines to manage per client and contract. It was clear they needed a smarter, faster way to approach negotiations, something that could ease the work without sacrificing accuracy and value.

Sonae Arauco needed a solution that could be integrated into their existing IT environment and SAP platform as a fundamental part of their infrastructure. The seamless integration allows real-time data exchange between all their systems and ensures that relevant data is always kept up to date.

Consequently, Sonae Arauco can now effectively manage the complete pricing waterfall, from gross to net price. Additionally, the company employs market intelligence through Sales & Customer Insights within Analytics, allowing them to set and monitor their KPIs and control margin and profitability as one of their most critical requirements.

Price Setting provides the much-needed visibility over price lists and pricing scenarios, enabling the users to easily create and manage price lists for different markets.

With the deployment of Agreements & Promotions, Sonae Arauco can now significantly improve the management of campaigns and promotions, with contract management and negotiations for differentiated markets all now managed directly from the Salesforce interface. This was made possible by Salesforce integration interfaces, in addition to the implementation of a review and approval process for all campaigns.

Before refining the process of negotiating contracts, the company identified segments and established a standard pricing base by focussing on their trade network dealers and aiming to standardize practices across each customer level, simplifying subsequent steps.

They created a customer grid of discounts, consolidating numerous SKUs into a few negotiation lines. By grouping similar customers within the same segment, they implemented a default negotiation across multiple customers simultaneously. This enabled them to update many contracts in a single action.

The implementation of the Pricefx solution has allowed Sonae Arauco to eliminate manual processes in pricing by automating pricing-related tasks, removing the work previously performed with complex, time-consuming, and error-prone Excel tables. They streamlined their pricing processes, allowing them to process sales orders and quotations much quicker than before.

The Pricefx pricing software solution has enhanced transparency and visibility across pricing processes by integrating the entire pricing system into a unified framework with SAP and Salesforce.  This integration supports their efforts to remain competitive in the rapidly evolving and dynamic markets in which they operate.

Within just 12 months of activating of Pricefx, the company achieved both significant revenue and margin increases. The decision to begin their pricing journey in 2018 proved to be the best one, as the implementation of Pricefx and improvements in pricing maturity and processes helped Sonae Arauco maintain their position when the global wood market became significantly dynamic and volatile in 2022.

Additionally, minor adjustments in contract negotiations drove substantial efficiency gains. It led to a more streamlined and straightforward pricing policy, significantly reducing time spent by both sales and back-office teams and providing clients with quicker access to their pricing conditions.

The company successfully reduced the number of individual contract types from 149 to just four generic ones, achieving a remarkable 97% reduction. With each contract previously taking around 13 minutes to create, this change saved more than 30 hours per quarter, equating to three weeks of work annually.