Re-Pricing from an EMS industry standpoint

What is re-pricing?

    This is an activity where buyer and seller agrees on a point to reset the buy price and sell price. 

    Why is this important? It is critical to set the financial information right, as well as the values of the existing inventory. The price of the materials will fluctuate either in a short term, or long term. If this is not done, the financial of the organization will be questionable, and not accountable for. 

    Below is the proposed process flow for re-pricing. I believe I have covered most of the critical areas. 

 

    If you need a clearer picture, please email me. I have them in pdf file or in a format derived from the apps called "Flowdia".

    It is a major process and usually, the below parties are involved:

• program management
• finance
• inventory analyst
• procurement team
• costing team
• customers
• planner

    How often this is done? Preferably, quarterly and longest should be half yearly. Imagine, if your buying price differs every month, but you do not change your selling price for one year, what will happen? The total inventory values will not be accurate. Also, you may continue to keep making money (if your materials buy price keeps going down) or continue to lose money (if your materials buy price keeps going up). However, if you material cost is insignificant, then you can reset your price annually, or longer. 

    

    If may not be very easy to understand this condition quickly. I am preparing an article on "inventory revaluation". Please watch out for my article. I am pretty sure you will be able to understand further once you read the said article. 

    What are the activities that will follow up after the re-pricing activities?

• agree on a re-pricing date
• set the sell price and buy price in the ERP & finance system. Implementation date is critical. 
• Are there loop holes? YES. And I will be writing another article on this
• The loop holes enables an organization to either make money or lose money 
• inventory revaluation
• buyers to revise the open POs with the correct price
• seller to revise the invoice accordingly with the correct price

    You may ask me.... what happens if a customer refuse to go into the re-pricing process/agreement with you? There is a trick to this. Please drop me a note if you would like to know more of this. 

    I hope this article provides a very brief overview of re-pricing activities. Please share your thoughts and feedback as I always appreciate your valuable feedback & viewpoints. 

Thank you for your time. 

Best regards,

Ronald Gan