Sandvik was founded in 1862, when G.F. Göransson launched a revolutionary method for industrial scale steel production, and is still world leader in metallurgical and technological innovation (± 8000 active patents). Their high-tech products and services enhance customer productivity, profitability and safety. Organized in five business areas with their own R&D, production facilities and sales force: Mining, Machine Solutions, Materials Technology, Construction and Venture.
Mining: tools & services
Exploration, rock drilling, cutting and crushing, loading, hauling and materials handling solutions for surface and underground applications – Sandvik has around 13000 employees dedicated to Mining. As a leading supplier in equipment, tools, parts and services for this industry, Sandvik works closely with local customers to adapt products and services to new challenges and opportunities. In recent years, the importance of Tools & Services has outgrown that of Equipment and Mining Assistance contracts.
As Tools & Services is responsible for the majority of Sandvik’s revenue in Mining, this is where they have started building their first Pricing teams. These consist of 10 FTE dedicated to Parts and 4 FTE dedicated to Tools. Although team members are located around the world to keep close ties with their respective markets, involvement and collaboration are very high within the team. The Parts Pricing Team is in charge of over 300 000 SKU’s in six different continents. Rapid developments have created the demand for a new Business Analyst at HQ in Amsterdam to help the Parts Pricing Team establish and automate processes.
From unmanned underground loaders with proximity detection to cutting-edge rock drills used for tunnel construction in the Alps, Sandvik Mining and Rock Technology is the leading pioneer in mining and construction equipment and services. Ongoing innovations require a new approach to pricing, based on factors such as value for the customer, business model and market conditions.
World leader in metal and technological innovation
Sandvik was founded in 1862, when G.F. Göransson launched a revolutionary method for mass-production of steel. The company is still world leader in metallurgical and technological innovation with over 8000 active patents. Their high-tech products and services boost customer productivity, profitability and safety. The organization consists of three main business areas, each with their own R&D, production facilities and sales force: Mining and Rock Technology, Machine Solutions and Materials Technology.
Sandvik Mining and Rock Technology (SMRT)
Sandvik has around 15,000 employees dedicated to both Mining and Construction. As a leading supplier in equipment, tools, parts and services for these industries, Sandvik works closely with local customers to adapt products and services to new challenges and opportunities.
SMRT consists of eight relatively independent product preas. Each company has its own President, full P&L responsibility and its own global Head Office (based in Amsterdam). The product areas are:
- Surface Drilling & Exploration (Tampere)
- Underground Drilling (Tampere)
- Load & Haul (Turku)
- Crushing & Screening (Svedala)
- Mechanical Cutting (Zeltweg)
- Rock Drills & Exploration (Tampere)
- Parts & Service (Amsterdam)
- Rock Tools (Sandviken)
SMRT sells most products directly to end customers in more than a hundred different countries. These are large mining companies and mining contractors as well as construction companies. Global Sales manages all sales in 14 sales areas across the globe. The sales areas have to follow the directions of the eight product areas and deliver the sales volume.
Mining and Rock Technology: Pricing
When Ernst-Jan Bouter joined Sandvik as Global Pricing Director in January 2015, he had a clear strategy for building the company’s pricing capabilities. He reinforced different pricing teams in the product areas Tools and Parts & Service to establish global net price reporting processes to measure price performance of over 300 000 SKU’s and large-scale maintenance deals. And he started building a central pricing team with former strategy consultants, focusing on projects to establish best practices and a value pricing process.
“Market and value-based list prices, a systematic global process to manage price changes due to foreign exchange fluctuations, training local sales forces to sell value, pricing new products and innovations… It’s fair to say we have come a long way since I started here two years ago. And it’s time to shift to the next gear by hiring a Pricing Manager to implement complete value pricing management in each SMRT company.” – Ernst-Jan Bouter, Global Pricing Director
Determining the right price for Sandvik’s many innovations is not about costs, but about value for the customer, market conditions and cross-selling. The Pricing Manager will implement the pricing strategy, processes and organization for the entire product portfolio in three product areas. This role will have huge bottom-line impact and set a shining example for other companies within Sandvik Group.
Building the organization
The company now needs a systematic approach to price management to implement the pricing in the business and reap the value by increasing profits and revenues. To this end, the central team of three is focusing on the eight product areas. The team is seen by the presidents as indispensable support to turn around the management teams and commercial teams to implement the right list pricing, support value sales, evaluate and drive deal pricing and negotiations and evaluate the pricing performance. In addition, each Product Area is advised on how to implement new product pricing, FX-related price changes, price models (leasing, performance-based fees, bundling, etc.) and channel pricing.
Next to the core role for product areas, the central pricing team is a key support for the CSO and the CFO, helping improve sales effectiveness. The CIO has installed a separate IT team to work on pricing following the central pricing team’s directions. All SMRT CEO MT meetings have pricing on the agenda as standard topic, so Bouter can share the progress across the company and point out particular challenges. The new Pricing Manager will take on part of this role, supporting three product areas and assisting the Senior Pricing Manager and the Pricing Director in the other advisory work.
The amount of exposure within the global organization requires advanced communication skills and a down-to-earth attitude. Proven communication and interpersonal skills are a critical success factor. An engineering degree is definitely an advantage. A background in consulting has proven to be a success formula for Sandvik’s Pricing teams. Pricing experience is not necessary, as long as the candidate is eager to learn on the job. Pricing is seen as a breeding ground for talent, but candidates are expected to carve their own career path within the commercial organization.
Determining the right price for Sandvik’s many innovations is not about costs, but about value for the customer, market conditions and cross-selling. The Pricing Manager will establish the pricing strategy and processes for all new mining products up to €2,5 billion. This role will simultaneously have huge bottom-line impact and set a shining example for other companies within Sandvik Group.
As the leading pioneer in mining, Sandvik continuously launches cutting-edge technology. As there is no direct competition for these game-changing products, the freedom to price is relatively large. For example, Sandvik recently developed a new system which makes rotary blasthole drills more efficient and reduces environmental impact. Because the compressor and the engine are no longer directly connected, there is no need to maintain pressure when the machine is not drilling. As a customer put it: “The Compresser Management System will save us thousands of gallons of fuel every year. Not to mention refueling time and wear and tear on the drill pipe and engine. It’s a classic no-brainer.” To help customers believe in the value of this product, it is offered with a guarantee that they can earn back the purchase price within a year. That’s clever pricing.
The amount of exposure within the global organization requires advanced communication skills and a down-to-earth attitude. An engineering degree is definitely an advantage. A background in consulting has proven to be a success formula for Sandvik’s Pricing teams. Pricing experience is not necessary, as long as the candidate is eager to learn on the job. Pricing is seen as a breeding ground for talent, but candidates are expected to carve their own career path within the commercial organization.