Miller Formless - IFS

I F S C u s t o m e r s t o r y
Technology helps equipment manufacturer
master the costing and pricing processes
Setting the price of goods for sale can be considered either an art or a science.
And accurately tracking the cost of the thousands of component parts that go into
a piece of complex machinery can be some combination of both.
The challenge
Managers at Miller Formless found that this blend of art and science can benefit
from a little automation. The company was able to leverage costing and pricing
functionality in its existing business software to capture price changes in raw
materials and component parts and update that information in pricing used in
new equipment manufacturing and selling aftermarket parts to customers.
Aftermarket part sales are a small part of Miller Formless’ revenue, amounting
to about 10 percent of sales, but a big part of what it takes to keep equipment
serviceable in the field for its customers. List price of aftermarket parts
sold directly to Miller Formless customers—including parts manufactured by
Miller and parts purchased and resold for the convenience of their customers—
needed to be tied more directly in with Miller’s cost.
About Miller Formless
Miller Formless Company Inc. of McHenry, Ill.,
U.S.A., manufactures slipform machines,
equipment used to pour concrete curb
and gutter, parapets, barriers, sideways
and pavement. These complex pieces of
machinery are key capital assets for road
building contractors.
The solution
According to Miller Formless Business Analyst Tony Borkowski, net income as
a percentage of sales at Miller Formless for 2003, the year before implementing
IFS Applications for pricing and costing was 3 percent. The following year, the
company increased its net income as a percentage of sales before adjustments to
10 percent.
“We have maintained double digit percentages in our margin every year since
formalizing our pricing and costing functions.” Borkowski said. “The information
provided has been so useful that we increased our net profit percentage from
year to year even though our net sales were down during the same year to year
comparison.”
But by early 2008, management was only beginning to fully use the solution’s
pricing management capabilities.
“We were not really using the list price functionality in the financials package
to its potential,” Borkowski said. “Our initial pricing strategy was simple and
met our basic needs. Over time we learned more about the pricing module functionality,
and were able to re-think and re-design a more robust, flexible pricing
strategy. Our goal was to allow us to easily review pricing variables and quickly
update price lists instead of looking at individual prices. This is particularly
important on parts that we purchase and resell. We take a lower margin on those
so that we can be competitive and serve as a one-stop-shop for our customers.
So as our cost structure changes on each part, we need to make sure that we
periodically review our cost and update our pricing accordingly given our slim
margin.”

I F S C u s t o m e r s t o r y
En11010-1 Production: IFS Corporate Marketing, December 2009.
Automating these price changes turned out to be relatively easy, according to
Borkowski.
Refined pricing processes
“The first thing I did was purge the old price list, which included 10,000 sales
parts. We were pricing these items using 18 different price lists. People in the
company would see all 18 price lists and have to understand which one to use
when. Now we have just two price lists—our base price list and our market
competitive price list, which includes commodity items we sell for the convenience
of our customers,” Borkowski said.
To minimize disruptions, Borkowski exchanged the existing price list for
dynamically sourced price lists driven by IFS Applications after hours.
Borkowski said, “Working with Management, it took me about 3 days to
establish the new pricing strategy and figure out how to set it up within IFS.
The entire Friday after-hours implementation took less than 3 hours.”
The difference in the way Miller Formless handled aftermarket part sales
surfaced immediately the following Monday.
“First thing on Monday, I got a call from our parts manager, who had noticed
that the auger flight price was up 65%,” Borkowski said. “I immediately investigated,
and found that our cost had gone up 60% over the last 2 years. We never
increased prices to account for this cost increase… until now. For the last two
years, we had left that money on the table by not utilizing a proper profit margin.
We sell a lot of that part. When it comes to purchased parts like concrete vibrators,
our customer can purchase those parts from the part manufacturer so we
make sure that our price matches or is close to the manufacturer’s retail price.
We want to remain market competitive and want the customer to be satisfied
and buy all of their parts directly from us. We will now be doing regular price
adjustments—up or down—enabled by the new pricing system.”
“Since automating our market competitive parts pricing, we are getting
fewer complaints from customers telling us they can get a part cheaper elsewhere,”
Borkowski said.
When basic materials costs of parts used in the manufacturing process go up,
according to Borkowski, it will be easier to note the price increases and change
them in Miller Formless’ accounting system.
“When steel goes up as it did a year ago, we need to adjust prices for all of
the manufactured parts,” Borkowski said. “But we are now automating that
process, and will be writing a Crystal Report against that screen to see if we
want to change the price because of price increases from our suppliers. Right
now, we will have to keep an eye on anything that is petroleum-based, like our
hydraulic power hoses.”
Aftermarket service automated as well
Miller Formless has recently rolled out IFS Applications functionality to manage
aftermarket service as well.
“We also just implemented work orders,” Borkowski said. “We are currently
completing only about one or two work orders per week or six to eight
requests a month for service and support on our machines. Previously, we had
been managing all of these service requests on paper. Work orders will help us
track our cost. And our customers’ will notice that as we get busier in aftermarket
service, we have excellent records of what had been done to their piece of
equipment over time, and that can help us troubleshoot things more easily.”
Benefits
• Improved cost management for complex,
highly engineered products.
• Pricing management and automation
on thousands of aftermarket parts.
• Improved aftermarket sales and
service in the manufacturing environment.
“We have maintained double digit
percentages in our margin every year
since formalizing our pricing and
costing functions. The information
provided by these components has
been so useful that we increased
our net profit percentage from year
to year even though our net sales
were down during the same year to
year comparison.”
Tony Borkowski, Business Analyst
Miller Formless
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