A distributor of heating, ventilating and air conditioning aftermarket parts was troubled by the lack of a structured pricing system to handle its 100,000 SKUs. The firm kept an inventory of blower motors, switches, thermocouples and similar components to serve its customer base of contractors.
The problem existed among the sales team: Sales reps had broad authority to set prices on a transaction-by-transaction basis. Management had loosely set profit margin targets through a broad-based approach that left plenty of room for sales reps to discount or mark up prices. This made it difficult to control price across the large number of SKUs and an even larger customer base.