Eliminate Margin Leakage in the Chemical Industry (Stahl Holdings)
Stahl Holdings B.V. is the world leader in specialty chemistry of coatings, processing, and treatments that help materials perform better for longer.
Established in 1930, Stahl has its headquarters in Waalwijk, the Netherlands, and is supported by a global workforce of nearly 2,000 across more than 27 locations globally. The company works with partners worldwide to develop and deliver the essential chemistry of everyday materials, such as footwear, clothing, automobiles, and home furnishings. They are committed to shaping a better chemicals industry – one that allows high living standards within environmental boundaries.
In order to realize its goals, Stahl identified four areas of strategic importance: digital transformation, open innovation, renewable feedstocks, and sustainable development.
Stahl Leather Chemicals division first contacted Pricefx in October 2019 and became a customer in March 2020.
A Disconnected Pricing Strategy Leading to Margin Leakage
1. A Need for a Clear Company-Wide Pricing Strategy
Back in May 2014 and in October 2017, Stahl acquired two companies that became a major part of their business, and then in April 2018, it also merged four of its own Leather divisions. However, none of the divisions, nor the acquired companies, used the same pricing strategies, methods, or calculations. In fact, in some cases, two different divisions dealt with the same customer. To make matters more urgent, the leather chemicals industry was experiencing several acquisitions and consolidations. The risk of sharing prices between customers and the difficulty of defending these prices increased. Consequently, this resulted in price decreases which impacted Stahl’s margins.
As a result, Stahl Leather Chemicals division made the unification of pricing one of their top strategic projects.
2. Disconnected Pricing Systems and an Over-Reliance on Excel
One of the reasons the company had no centralized control was that everybody was using their own tools and systems. The majority of the sales representatives used Excel which meant they ran the risk of applying incomplete and old data to deals and also resulted in zero visibility in quoting processes.
The whole process was mainly manually driven, without proper (central) guidelines on price setting and discount strategy. This led to potential and actual process inefficiencies which became the main drivers of changing their pricing methodology.
3. Inefficient Processes Exposing Risks
Updating or changing prices required communication via email and then manual data entry into SAP, risking errors. Approval workflows were processed via email and manual entry which was time-consuming.
4. Unable to Measure Business-Critical KPIs
It was difficult to measure quotes converted into deals as information was held across multiple conversations in emails and on the phone. They weren’t able to measure their win ratio either. It was also not possible to measure approval workflows because it would mean going through the emails of more than 50 people and would have presented too much of a drain on resources.
Knowing they had much work to do, Stahl employed Simon Kucher & Partners to support the division on how to define and adopt the new pricing strategies and methodologies. Following that, Stahl employed Pricefx to implement a pricing solution that would facilitate and implement the new structure and methodology.
Successful Remote Implementation of Four Powerful Tools
To tackle Stahl’s pricing issues, Pricefx implemented its QuoteConfigurator, PriceBuilder, PriceAnalyzer, and IntegrationManager modules.
After initial face-to-face meetings, the whole project had to be delivered remotely because of the pandemic. While this did present a few challenges due to the lack of in-person sessions and workshops, Stahl was impressed by the professionalism from both sides.
“I promoted internally that this digital project could be held remotely with a high efficiency ratio without impacting quality, budget and speed, which I think is a big success!”
Perry Sturm, Project Manager
Pricing governance at Stahl is now done centrally at the company’s headquarters by the pricing team. Price execution is done centrally by the different sales representatives. PriceBuilder has enabled them to establish a centrally managed logic and approval workflow with auto-generated prices that can be overridden or adjusted. It supports the team in setting pricing for over 2,250 products to be sold to almost 1,500 customers. They are now applying a new pricing strategy while for a small portion of their product portfolio, they have kept the ‘old’ pricing approach.
Pricefx’s CPQ, part of the QuoteConfigurator model, was implemented to support sales across nine regions and 70 countries. It boasts a highly sophisticated intra/extra company freight cost calculation and three-level quote approval workflow.
Integration Manager was used to perform 13 automated inbound data interfaces, 28 manual inbound interfaces, and one outbound interface in order to ensure excellent integration with SAP.
Full adoption of the new pricing strategy is taking time, as many sales representatives were used to work with their own methods for many years. This is an ongoing process, to be managed by the Leather Chemicals organization.
Company-wide Clarity, Transparency and Pricing Prowess
It was clear from the beginning that Pricefx met all of Stahl’s strategic goals. And with our help, Stahl has successfully eliminated margin leakage thanks to automated pricing calculations that always include accurate pricing elements for quoting. There is also an approval workflow with centrally defined authorization boundaries. What’s more, they’re now able to identify margin improvement opportunities through analytics.
While it’s clear the new pricing methodology and software implementation have positively impacted margins, the team is unable to measure the improvement due to the current global cost inflation situation and the fact Stahl had to adjust its sales prices several times to protect the company margins.
Which brings us to the next big point: after Stahl implements the second phase of this project the team will be able to accommodate mass price changes.
The company is also now able to interface with current SAP systems to exchange master data. Having improved their process efficiency and speed through seamless integration, manual work and lost time have been dramatically reduced. The removal of manual data gathering, data entry, pricing calculations and back-and-forth emailing has reduced the risk of error, too.
The enhanced transparency afforded by the Pricefx platform makes it easier to communicate the company’s value proposition. The turbulent current market climate has forced their priorities and needs towards fast price increases, so they are looking forward to this stabilizing so they can be proactive in their pricing and focus on reducing price spreads and improving price dependability.
The most notable improvement to their pricing processes has been speed. With all the information held in one place, processes and market reactions are much faster. Approvals now take a few minutes. What would have taken the administrative team days to calculate now takes just a few hours. No more manually combining multiple elements, connecting complicated tables or extracting information from someone’s head.
By freeing up this valuable time, the team is able to work on quality, the dependability of their pricing, and the continuous improvement and optimization of the tool itself.
Stahl is looking forward to getting to work with the PriceAnalyzer module in the second phase of the implementation. The focus of the phase is mostly making technical improvements, which will be done by the Pricefx and Stahl development teams, while their business analyst takes care of analytics.
“Every project has its struggles. But the ability to communicate within and between both teams and act fast resulted in a huge success. Stahl has learned from it. A learning curve is good, this helps our team and company for future projects. And I’m happy that Pricefx also takes these learning points through to the next phase. They take it seriously.”
Perry Sturm, Project Manager