• We need to know the BEP of each product
  • We need to know the PBT for each product (i.e. if we were to make only this one product on all machines for the full year). We will use the costing software for this.
  • Each member should have access to this database. There may be hundreds  of individual products. Each product should have a unique number.
  • Products are classified as “difficult” or “easy” or “exclusive” or “monopolistic”. Such attributes may be anywhere in the value chain.
  • The MD/Pricing Team should be  consulted for “Entry” & “Exit” prices.
  • The objective is to better the profit as compared to similar products sold earlier.
  • We need to consider past prices of similar products
  • We need to know whether the customer qualifies to be a loss leader
  • We need to know the variations within the product
  • We need to know whether the product will have continuous orders or whether it is a one-time requirement.

In the trims business, often the customer does not take competitive prices, as it is difficult for him to do so. But he may have an arbitrary price in his mind at the time he does the costing of his garment. If his arbitrary price is less than our quoted price, he wants to bargain.

The alternative method: Start out with what the market is willing to pay & design to that price specification. To start out with price & then whittle down costs is certainly more work initially but better in the long term. The team should achieve a cost structure that should allow it to make the necessary profit at the preset price.