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Spot Pricing: How Pricefx Enhances Chemical Industry Margins

April 24th, 2024 | 8 min. read

By Garth Hoff

In chemical and process manufacturing pricing, spot pricing is a primary element of the go-to-market commercial process that provides a unique opportunity to profit from an informed reading of volatility, competitive, and market forces when prices are otherwise locked into long-term pricing agreements via contracts. However, understanding how well short-term spot pricing decisions align with a company’s margin, volume, and revenue goals can be tricky to master without the performance visibility afforded by data-driven pricing tools.

In this article, we’ll explore how Pricefx solutions in particular support chemical companies in refining their spot pricing strategies by empowering them with real-time data analytics for measuring and forecasting spot price performance against analytics KPIs

With that, let’s dive in!


Why Spot Pricing Is Key in Chemical and Process Manufacturing & Its Challenges

In the chemical and process manufacturing industries, spot pricing is often used in the short term for non-contract customers or for transactions lying outside of contracts (e.g., buying outside or above volumes outlined in the contract).

In these industries, where competitors often produce product via one or more alternative paths using similar but distinct chemistry, spot pricing allows chemical and process manufacturing companies to capitalize on price trends and competitive differences where prices are advantaged in a given region or production location. Clearly understanding a competitive advantage on sport or contract rates (for example, capturing low feedstock and freight prices) avoids margin compression even in shifting supply and demand dynamics worldwide. 

Effective spot pricing strategies aren’t just about adjusting prices on the fly in response to current market conditions but ensuring consistent alignment with broader business objectives. In their short-term spot pricing, chemical companies should strike a balance between capturing real-time market dynamics and adhering to monthly margin, volume, and revenue goals.

In the next section, we’ll explore how Pricefx helps companies in the chemical and process manufacturing sectors achieve this.


How Pricefx Enhances Spot Margin Performance for Chemical Companies

As we’ve noted, getting spot pricing right is crucial when adjusting prices outside of long-term contracts or catering to smaller customers without fixed agreements.

Using manual tools to manage spot pricing in response to fluctuating market costs and other external factors poses several challenges, ranging from pricing discrepancies due to slow reactivity, to limited visibility into spot price impact on margin and volume – often resulting in margin erosion and missed opportunities to profit.

Benefits of Using Pricefx for Chemical Spot Pricing

Pricefx offers a robust platform to increase spot margin performance with analytics-driven key performance indicators (KPIs) targeting margin improvement and price realization. These benefits extend across various dimensions, notably:

Margin Optimization: With Pricefx, chemical companies can optimize spot margins by leveraging real-time insights into spot price impact. Through a detailed view of spot revenue, margin, and volume performance across regions, industries, and customers, companies can make informed pricing decisions to maximize the profitability potential of their short-term pricing.

Alignment with Financial Goals: With Pricefx’s trends tracking for spot pricing impact on various financial dimensions of interest, chemical companies ensure that their spot prices align with annual operating plans and forecasts, staying on course to achieve their desired revenue, volume, and margin targets.

Enhanced Pricing Strategy: Pricefx offers a ranking capability to allow chemical companies to easily identify high and low-performing customers and products, which enables pricing and sales teams to identify opportunities for margin improvement and fine-tune their pricing strategies to drive more growth and profitability in the future.

In the next section, we’ll break down the core Pricefx capabilities that empower chemical companies to ensure their spot pricing activities are aligned with their broader financial goals.


Diving Deeper Into Pricefx’s Spot Pricing Capabilities: Three Key Uses


1.     Detailed View of Spot Performance

Pricefx offers chemical companies data-driven tools to access a granular view of spot revenue, margin, and volume performance over time, segmented by region and product category. Pricing analysts are armed with a wealth of capabilities to increase their visibility into spot pricing and discern trends across geographical, industry, and customer segments over time, enabling quicker reactivity and data-informed spot pricing decisions. These include:

  • Spot margin time-series charts for past and future spot pricing performance insights
  • Spot business summaries of financial KPIs across regions and industries
  • Customer-specific performance charts
  • Force ranking of low and high performers

In the next few subsections, we’ll explore what each of the above does and how they facilitate increased spot margin performance.


2.   Trend Analysis

Pricefx offers real-time analytics tools to enable chemical and process manufacturing companies to intuitively track trends in spot pricing performance against their financial plans. Armed with the ability to monitor performance metrics in real time, companies can adjust their spot pricing strategies effectively to meet the demands of fluctuating market conditions and trends.


Margin Performance (Actual and Forecasted) Time Series Charts

Among the key features Pricefx offers to accomplish this is a high-level overview provided through a time series margin performance chart, allowing companies to visualize fluctuations in margins – both those observed over the previous 12 months and forecasted for the subsequent 12 – to understand and anticipate periods of decline and recovery.


Spot Business Summaries

Pricefx’s built-in analytics also provide companies with a comprehensive spot business summary to understand trends across various financial areas of interest – namely, revenue, margin, and volume performance.

Over a year-to-date period, Pricefx enables companies to track percentage increases and decreases across these three financial analytics KPIs. The platform employs easy-to-spot color marking to highlight areas where performance may be falling short of the company’s goals. These actionable insights are intuitively organized by industries and operating regions to enable companies to pinpoint low-performing regions or segments.


Customer Performance Pie Charts

Additionally, while it is expected that some customer accounts garner higher margins than others, many of these discrepancies can be addressed with refined pricing strategies. However, understanding how each customer contributes to a company’s financial goals can be tricky without real-time analytics. To help, Pricefx also offers customer-specific performance pie charts to assist companies in optimizing their spot pricing decisions on a per-customer basis.


3.   Force Ranking

For enhanced visibility into customer performance, Pricefx offers force ranking by category of high and low-performing customers and products to enable pricing and sales teams to join efforts on areas with the greatest potential for margin improvement.

Force ranking especially comes in handy for chemical companies with a wide customer base composed of diverse industries such as automotive, construction, and pharmaceuticals. With this capability, companies can systematically assess customer performance across their many accounts by quickly identifying the highest and lowest performers. Through an awareness of these two groups, companies can direct their efforts toward refining pricing strategies for lower-performing segments to mitigate future margin erosion and drive long-term profitability.


Pricefx’s Spot Pricing in Action: A (Hypothetical) Real-World Example

Now, let’s consider a (fictitious) example of a chemical company that decided to use Pricefx to increase its visibility into spot price performance.

Before implementing Pricefx, Solvateer Industries, a petrochemical manufacturing company specializing in industrial solvents, grappled with numerous challenges in managing their spot prices manually.

With frequent incoming market cost changes, particularly volatile crude oil prices, and fluctuations in transportation costs influenced by factors such as fuel prices and geopolitical events, Solvateer Industries struggled to measure the effectiveness of its spot-pricing activities. As a result, they often unwittingly offered prices to their customers that fell short of their short and long-term financial goals. And, without real-time data insights to see how their spot margins were doing, they were left with little understanding of their true financial health and where to direct their efforts to improve it.

In response to these challenges, Solvateer Industries turned to Pricefx. First, using force ranking and customer performance charts, they identified a core group of smaller customers that posed the largest obstacles to monthly margin and revenue goals through the consistent provision of inaccurate spot prices. They also leveraged spot business summaries to pinpoint industry and region-level underperformance to devise an action plan at a higher level. Armed with real-time data insights, pricing and sales teams worked as a unit to adjust strategies, aiming to increase overall margins by prioritizing low-performing customers.

When the team checked in on progress made with time series margin performance charts, they observed significant financial improvements over the year and much more favorable projections for the next.


Beyond Spot Pricing, How Can Pricefx Support Your Chemical Company’s Goals?

By the end of this article, we hope that chemical and process manufacturers, like yourself, have gained a deeper understanding of how Pricefx facilitates enhanced spot margin performance through its comprehensive suite of analytics-driven solutions.

By offering real-time data insights to foster spot margin optimization efforts, greater spot pricing alignment with short-term and long-term financial goals, and refined pricing strategy targeting underperformance, Pricefx is here to assist chemical companies in unlocking new levels of profitability and competitiveness.

But wait, there’s more! Enhancing spot pricing performance is just a fraction of the benefits offered by Pricefx to companies in chemical and process manufacturing. Curious to learn more about how our solutions are tailored to address challenges in your industry?

Consider heading to our comprehensive article on Pricefx features for chemical companies below:


Garth Hoff

Director, Industry Strategy , Pricefx

Garth Hoff is a 15-year veteran of the pricing industry. He has real-world practitioner experience as a Director of Pricing Strategy, and also pricing software and services leadership experience leading solutions, strategy, sales, product management, and marketing teams. His experience encompasses products, services, B2B, B2C, and e-commerce functions at Ascend Performance Materials, IHS Markit, PROS Revenue Management, Orbitz.com, United Airlines, and General Motors – Delphi Automotive Systems. In his current role at Pricefx, Garth focuses on providing companies with a future vision of what is possible with pricing software while also helping them to make the best possible decision when investing in software.