Precision Pricing Software

Forensic profitability analysis for small and global businesses alike is available at a click with today’s supply chain software, as Paul Hamblin discovers.

Graeme Aitken has a job title I’ve never heard before: he’s VP Strategic Customer Pricing, part of the global pricing team at parcels and shipping behemoth DHL Express. In essence, he is available when the standard company pricing process becomes more complex. “If we have a profitability issue, whatever it is, I tend to get involved,” he says. “I also work on larger yield projects.So if we want to look at unprofitable customers, unprofitable lanes, I help come up with various yield initiatives.”

‘Complex’ in this context can mean several things. “It might mean complex operationally, where we might offer services beyond normal pickup and delivery, or it could be complex pricing. Examples might include running dedicated trucks to the customer; or we might have people working in the customer premises to process shipments on their behalf, perhaps including specialpackaging requirements or customs paperwork.”

Some years ago, as Head of Global Costing, Graeme Aitken built a new cost and profitability system for DHL Express. Historically, it was painstaking work, using the more basic spreadsheet skills available at the time and requiring detailed visits to DHL facilities to examine processes up close (“Time and motion studies, basically,” he sighs). By 2012, the company started to fully automate.
“So we now had every checkpoint for every shipment. Because we had that, we could cross reference it to the P&L, we could cross-reference it to the billing data. And we could produce margin data for every shipment that goes through our network.”

This is where data software vendor The Information Factory came in. The UK-based supply chain software specialist used this new profitability data to create a set of applications for Graeme Aitken and his
team which enable forensic analytical capability of DHL’s global network and processes. The results are astonishing levels of data knowledge that would have been inconceivable even a few
years ago.

How does it work, in layman’s terms? “We can look at groups of customers when we have a potential problem somewhere in the network. So, for example, we might have too much business on particular lanes. And if our planes are full, we either have to get a new plane, which is very, very expensive, or we take off the cheapest business that’s flying that plane; or we put in a rate increase, perhaps.”

The Information Factory has built the analytical capability to make these examinations very quickly. “Because I can specify a bunch of criteria,” Aitken goes on, “I can ask for, say, every shipment which is coming from Hong Kong, every shipment which is going to the US, every one over 30 kilos, or less than a certain price per shipment. With these high filter delivery percentages, I can specify such criteria and the system will immediately deliver, say, 50 customers that meet that criteria and need action.”

The data thrown up by the system is then shared with DHL’s relevant country management teams. “We will share everything with the country concerned, because the first thing we want to do
is check that the data is accurate,” Aitken explains. “If there’s a credit note, for instance, that needs to be taken into account. Then the country has everything it needs to fix the issue.”

All such knowledge is distributed through the system that The Information Factory built. “It creates the analysis at the front end, it’s the distribution tool for all the data, and then the country must come back and tell us what they’re going to do. And then we’ll go back to track it and measure the improvement.”

He says that The Information Factory is very good at building prototypes and showing what they can do for their clients, quickly. “It’s straightforward. Their experts say: ‘Here’s what we can do for you. Here’s how it’s going to work. Here’s a small testing set. Here’s how and why tests can be done quickly.’” And he wanted to succeed quickly, he confirms. “It can give me every customer with a margin of worse than minus 10%. If that’s too many, I make it minus 20, minus 25 minus 30. And I can run iterations of this stuff 20 times a day, if I wish. I will also go to the customer with the salespeople to discuss pricing. And you have this amazing information at your fingertips and you can show them why you’ve come up with the price you have. We can be very surgical in the actions we take.”