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Insight

March 15th, 2021 (Updated 03/31/2021) | 10 min. read

Duncan Hendy

What the Discrete Manufacturing Industry Can Learn From 2020 to Plan for 2021

 As we head further into 2021, it’s clear that although some things are going back to normal, that “normal” might be further off than we anticipated. So, what’s someone in the manufacturing industry to do? 

That’s why we asked the experts what they think are the biggest lessons and windfalls of 2020 and what companies like yours can do to still be successful in 2021 and beyond. 

In Your Opinion, How Has 2020 Changed the Discrete Manufacturing Industry?   

Maggie Buckland – Big Data Pricing 

In 2020, the discrete manufacturing industry was impacted by consumer confidence, concerns about a global recession, and the operational and financial impacts of COVID-19. There were two main ways in which discrete manufacturers were affected: 

  1. Most manufacturing positions could not be done remotely and had to be completed at the manufacturing facility. 
  1. Reduced demand for products and the desire for deeper discounts based on economic concerns. 

Idrissa Diop, Pricefx 

I don’t know how it was before, but my perception is that the 2020 situation increased the interest of companies with low or no pricing maturity. They have heard pricing is the fastest way to gain profitability, which is key in the current context. 

Jose Paez, Pricefx 

Supply chain disruptions in their manufacturing processes will drive companies to find ways to offset these changes, this can, hopefully, result in a need to adjust offerings in the market with a reduced portfolio or adjusting value of products to better align with new segments in the market. 

Jared Wiesel – Revenue Analytics 

“Do more with less” is the new mandate.  

As a result, automation is more critical, digital migration has been expedited and there is no lever more power for a business to pull than pricing when it comes to driving performance. 

In addition, I see two more factors at play for manufacturers: 

  1. Volatility is here to stay. After years of relative stability across cost inputs, supply chains and customer demand, 2020 changed everything. While the “next normal” will bring some stability back, I expect the theme of high business volatility to persist, and not just at the company level but even more at the business-unit or product-line level. Companies are seeing a mix of both massive winners and huge laggards. Many of the supply and demand imbalances are likely to persist for some time, stressing manufacturers’ ability to respond quickly, adeptly, and correctly. 
  1. Cost-cutting efforts have been maxed out. Before the pandemic hit, I had thought most manufacturers had exhausted their potential for meaningful cost reductions. With the trough of the pandemic behind, that is for sure now the case for most. Thus, the path to profits and growth must now come through the revenue side. That is a big mindset shift for many in this space, and pricing muscles must be built to best compete for growth. 

What Are the Implications of That Change Going into 2021 and Beyond?   

Maggie Buckland – Big Data Pricing 

In 2021, discrete manufacturers will continue to feel the brunt of the operational and financial impacts of the global pandemic. 

Idrissa Diop, Pricefx 

There will be an increased need for the customer to take a more structured approach to pricing and then an increase in interest for pricing solutions which can help them to support their business processes and reduce margin leakage. 

Jose Paez, Pricefx 

An increased need to understand value of products in the market. For several years, many companies were able to develop products with economies of scale backing their manufacturing processes with little regard to the real value they brought to the market as it was easier to chase the segment willing to pay for that value. With the way the pandemic brought things to a halt companies find that they are not able to maintain the same level of operation of chasing for a suitor and now they must truly and thoroughly understand what they can bring to those customers they want to serve.

A clear value-based approach is now more important than ever to ensure continued business in many manufacturing companies. And to do that it will be paramount to have systems and solutions in place that enable teams to understand that value and create strategies that align to the business’ objectives. 

Jared Wiesel – Revenue Analytics 

I see three primary trends:   

  1. Excel will no longer cut it. Organizations have become too complex in their product offering, go-to-market channels, and customer base to manage it all in a spreadsheet.  
  1. Digital is changing the role of sales. Companies are grappling with how best to structure their sales organization and develop digital capabilities that allow them to meet the needs of customers who increasingly want digital self-service options without giving up any of the personalization that comes with a human-to-human sales interaction.  
  1. There is more focus on growing and maintaining existing customers. Traditionally, it was all about customer acquisition and the pricing-related actions there. Now, especially in pockets where the economy is not fully “open” and the prospects of new customer acquisition are slimmer, we are seeing much more focus on the actions needed to grow share of wallet with existing customers. Such efforts entail proactively recommending tailored product or service offerings to sell deeper into existing accounts or taking a more surgical approach to price increases to meet profit needs while better managing the risk of customer churn. 

What Is a Hurdle That Businesses in This industry Need to Overcome This year? What Can They Do to Overcome These Hurdles, if at All?   

Maggie Buckland – Big Data Pricing 

Businesses need the ability to reduce the risk of a virus outbreak and the resulting impact on global operations. Some possibilities to overcome this hurdle are: 

  1. Implement new procedures and processes to reduce a virus outbreak and accelerate recovery from a disaster. 
  1. Explore new technologies to automate manufacturing steps (invest in new assets and technology). 
  1. Review suppliers and plan for alternative suppliers if needed. 

Idrissa Diop, Pricefx 

Especially for nonmature customers, the fact that they can handle the pricing complexity by themselves mainly with Excel. The only solution is to move to a pricing solution . 

Jose Paez, Pricefx 

Do more with less, and do it in a very surgical way, time is of the essence and resources are limited, and past behaviors are nothing to guide companies into the future. 

Trial and error approaches are no longer feasible, the global economy is very fragile and price sensitivity is at an all time high. This must translate to a crystal-clear value-based approach to anything companies want to put in place. 

And going back in time to see cyclical patterns are as useful as a picture of an oxygen tank to someone drowning, so it is important that such new understanding must be based on an empirical approach and techniques that measure real needs and how to help companies be more productive in a very real way. 

Jared Wiesel – Revenue Analytics 

First and foremost, manufacturers need to overcome the status quo and finally act in improving their pricing. In the industries I work in, manufacturing and distribution, less than 20% of companies have any form of pricing capability beyond Excel. For a variety of reasons, most have chosen not to act in addressing their pricing pains. 

Those that continue to choose inaction will find it increasingly hard to keep up competitively, not to mention dedicate the resources needed to support the increasingly burdensome web of manual analyses, processes, and governance many have in place today as a band aid. Of course, that’s easier said than done, and not just any solution and approach will work, so while they must act, they must also be sure to define what success looks like for them, what resources and capabilities they need to achieve it, and where internal versus external support can best fill the voids. 

Do You See Any Glimpse of Positive News on the Horizon? How Can Businesses in the Discrete Manufacturing Industry Prepare to Take Advantage of This? 

Maggie Buckland – Big Data Pricing 

The global pandemic has reduced the ability to travel and meet with customers, this has allowed leaders to focus on other key initiatives and consider business transformation activities. The ability to be prepared for large deal negotiations could provide margin and revenue opportunities for discrete manufacturers in 2021, and for the next few years. 

Jose Paez, Pricefx 

Specialization in products can streamline their processes and offer the opportunity to increase value of their products to specific segments. This coupled with processes and systems in place designed to create capacity within the companies’ strategy teams will enable them to understand customer’s needs and present products to key markets in a profitable way. 

Secondly, take the last 12 months as a test on what to do to avoid being in a similar situation in the future, companies cannot rely solely on ingenious marketing campaigns or on superhuman sales teams on the field, being strategic about which products to offer and to which markets under a clear vision of what is the next best alternative is more important than ever. 

Jared Wiesel – Revenue Analytics 

I see sprouts of positive news throughout the industry, but how clear and how strong those signals vary by sector. Two trends that manufacturers must continue to enable are:  

  1. Keep up with the fast pace of change. The pandemic has forced many to adopt a pace of change unlike anything the company has experienced before. Keeping that urgency and resilience will be critical in 2021 (and beyond). It bodes well for finally breaking through the status quo when it comes to pricing, which for most is the biggest obstacle. 2020 proved the value of action over perfection, and the same is true with your pricing. 
  1. Increased collaboration throughout the value chain. Many of my manufacturing and distribution customers are increasingly talking about how to leverage data to sell more together, such as a manufacturer proactively recommending a better inventory assortment to the distributor to drive down costs, drive up throughput and better meet the needs of customers at a micro-market level. The potential here is huge and leveraging data with a customer-first mindset will be the big unlock. 

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About the experts: 

Maggie Buckland is the Managing Director of Big Data Pricing and has proven success in sales, design, implementation, training and the measurement of sales and marketing related applications. She has an ability to quickly understand business problems, provide solutions and communicate effectively to all levels in the organization. 

Idrissa Diop: Idrissa is a passionate pricer and is a pre-sales consultant who helps companies improve pricing, profit and growth with Pricefx software. 

Jose Paez: Jose Paez is an analytics and pricing strategy enthusiast. He has over 12 years of experience in pricing and has gone through all the circles of hell of pricing as an analyst, manager, data scientist and more, and has come back with a renewed enthusiasm of Pricing as a way to deliver value to organizations. His passion for simplicity and a tendency to try new things have proved to be a success many times and a failure-embracing learning opportunity at others. 

Jared Wiesel: Jared Wiesel has 20 years of Pricing and Revenue Management experience, helping manufacturers and distributors successfully sell the right product to the right customer at the right time for the right price. With an intense focus on delivering data-driven recommendations that are business reasonable, strategically aligned and adopted across the organization, Jared has partnered with many Fortune 1000 companies to drive profits and efficiency gains through better pricing.