Summary: In TEC's previous articles and blog posts about pricing management and optimization vendors like Zilliant, Vendavo, DemandTec, Servigistics or Revionics, the main focus was on finished goods (including spare parts). Whether these final products are sold at retail shelves to consumers or dealt directly between trading partners, their proper pricing is meant to create demand and profitability for the seller. In other words, the idea is to harness science to understand products' baseline demand, price sensitivity, and the impact of pricing actions based on demand sensing insights.

Recently, however, I had a chance to meet with an interesting pricing optimization startup vendor whose aim is to help upstream manufacturers and suppliers understand how to better translate commodity (e.g., corn, soy, oil, gas, electricity, metals, polypropylene) prices into viable final product mixes. For example, how can a meat packer make better downstream supply chain decisions on its choice of cuts (e.g., a beef carcass as a source material can yield more than one thousand various meat cuts as finished products) and ensure that they are priced best on the retail shelf at the end of a highly perishable supply chain?

This technology has been particularly instrumental for major food cooperations and processes with reverse bill-of-material (BOM) requirements. Such exemplar places where a source ingredient gets broken down into many pieces would be slaughterhouses. Reverse BOMs are also known as breeder BOMs, V-shaped BOMs, or inverted BOMs elsewhere in those industries that have to manage co-products and by-products. For instance, printed circuit board (PCB) makers can have one breeder item (a circuit board) that produces multiple co-products (individual chips), while a metal center will start with a standard steel sheet and produce a number of cuts to certain sizes (and off-cuts or remainders). Enter SignalDemand View article at Technology Evaluation