
II. Pricing, in the case of end products/spares sold through channel
partners like authorised distributors, dealers,
retailers & service providers prices lists are arrived after summing
up following parameters:-
- Updated input-landed material costs of bought out material, required to be further processed by manufacturing team
- Manufacturing variable costs like direct power, tools, consumables and labour
- Marketing variable costs like packing, outward freight & insurance
- Channel partner wise margins
- Expected costs of material supply of essential spares & consumables for running or operation of the end product during the free warranted period
- Expected Costs of labour for rendering free services during the free warranted period
- Minimum desired company margins to avoid negative contribution arrived as per following formula
- Taxes (state wise)
III. Further following
aspects are also considered relevant:-
- Competitor’s pricing
- At what stage of product life cycle, currently the product is
- Market segment
- Statutory restrictions
- Market situation in terms of political & social aspects
Potential unethical &
fraudulent activities
Following are some of the unethical & fraudulent activities that can happen and we should be aware of:-
- Not factoring all above aspects while arriving at price/MRP
- Factoring incorrect taxes
- Deliberately not updating input cost elements in the pricing software , while inputs costs changes are shared by finance or materials or manufacturing teams periodically
- Configuring incorrect algorithms w.r.t pricing conditions in the customised software or ERP module vis a vis above listed aspects
- Deliberately not configuring limited period , approved incentive scheme or pricing procedure in price computation software
- Conniving with competitors and pursuing cartel approach for pricing of the products/spares and servicing
- Deliberately missing out review of the prices of fast moving items
- Suppressing highlighting of negative contribution items from price review team
- Colluding & making unauthorised circular changes in price lists or & effective date by accessing software (to oblige some channel partners /customers) due to non -monitoring of audit trail
- Not sharing transparently with customer , updated price lists/MRP by the channel partner
- Valuable comments are invited from sales & distribution team on the above
Thanks for sharing your insights
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