Not every business has a standard price for their product or service, especially service business. They can’t just put price tags or price menu for all their services. One particular business that has a very customize pricing is 3PL [Third Party Logistics], this includes transportation and vehicle operating lease. This is happen because the cost for selling the service itself wide-ranging.
So, estimating how much we want to sell for our services depend on how much the cost [cost plus method]. Also, for some companies, they also decide by seeing who the customer is [cost to serve method].
Cost estimating and analysis is challenging for many companies including mine. We got a long term impact from the risk in doing wrong cost estimation. Operating Lease business is a long term contract and we feel the impact, if we are wrong in setting the price, in the end of the contract.
One of our BPR project is to make standard calculation for costing and pricing. So every branch will have the same method when they calculating the cost and the price. We made standard of how to calculate all the cost factors not on the pricing itself.
We also going to record the cost structure in our system [SAP], so every key person knows how much the budget for each customer. The objective for this is to control the margin. For example, if we set a maintenance cost for US$ 5000 a year, then we can compare it with the actual cost in that year.
This is an important project and very complex because we must combining ideas from the entire key person. Also, changing the culture and made people do the new calculating standard is even more challenging.
I just hope that our CEOs have a commitment to make every one doing this. We are just the CEO prompter; the one who assist with the concept and do the paper work; in the end, it is the CEO who must ‘sing’ the concept to everyone.
So, estimating how much we want to sell for our services depend on how much the cost [cost plus method]. Also, for some companies, they also decide by seeing who the customer is [cost to serve method].
Cost estimating and analysis is challenging for many companies including mine. We got a long term impact from the risk in doing wrong cost estimation. Operating Lease business is a long term contract and we feel the impact, if we are wrong in setting the price, in the end of the contract.
One of our BPR project is to make standard calculation for costing and pricing. So every branch will have the same method when they calculating the cost and the price. We made standard of how to calculate all the cost factors not on the pricing itself.
We also going to record the cost structure in our system [SAP], so every key person knows how much the budget for each customer. The objective for this is to control the margin. For example, if we set a maintenance cost for US$ 5000 a year, then we can compare it with the actual cost in that year.
This is an important project and very complex because we must combining ideas from the entire key person. Also, changing the culture and made people do the new calculating standard is even more challenging.
I just hope that our CEOs have a commitment to make every one doing this. We are just the CEO prompter; the one who assist with the concept and do the paper work; in the end, it is the CEO who must ‘sing’ the concept to everyone.
