Non-LinearPerformance Pricing

(NLPP)

The smart price analysis solution

THE SAPHIRION MISSION:OUR CLIENTS MAKE OPTIMAL GAINS FROM THE DEEPEST POSSIBLE INSIGHTS INTO THEIR DATA.

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NLPP analyzes all kind of product prices according to customer value / benefit / performance and shows you immediately which products or services have a good or bad price / performance ratio.

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For an NLPP analysis, the performance / value of the products is specified by the features & characteristics important for the user.

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Number of Cylinders

Power

Capacity

Life time mileage

Charging Time

Capacity

Volume

Voltage

Weight

Life Time

Volume Efficiency

Part Design

Number of Parts

Weight

Torque

Max. Revolution

NLPP uses the magic of mathematics in order to find out how selected product properties influence the price and comes up with a target price formula using those selected properties.

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Charging Time

Capacity

Volume

Voltage

Weight

Life Time

Volume Efficiency

Part Design

Any sufficiently advanced technology is indistinguishable from magic.-- Arthur C. Clarke, (1917–2008), English science fiction writer

NLPP benchmarks prices by customer value and performance, hence shifts the focus from a “discussion about costs” to a “discussion about value”.

ManufacturerPricing is resource driven and

based on cost-calculation(Cost of Production)

PurchasingSeeks for parts with specific functions and properties with the best price performance ratio.

Cost ⇾ Value(NLPP)

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NLPP calculates prices by customer value and performance, hence shifts the focus from a “discussion about pirce” to a “discussion about value”.

CustomerPrices are consistent with the performance and comparable

SalesArgues with benefits and uses consistent price-performance ratio

Value ⇽ Price(NLPP)

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Engineering(NLPP)Evaluation of alternatives while maximizing customer value at

optimal costs

Since NLPP evaluates performance changes in monetary terms, your engineering perspective expands to include market and customer information for optimal product design.

Market Information(NLPP)

Customer Information(NLPP)

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NLPP thus connects purchasing, engineering and sales through a uniform method which quickly and accurately assesses the value of prices & costs.

PurchasingBenchmarks, potential savings,

relocation, price consistency

EngineeringPrice estimates, similar parts,

cause effect relationships

SalesValue based argumentation,

consistent pricing

Which productshave potentialsavings and

how big are these?

What is a justified price for a new specification?

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The „magic“ about NLPP is that it finds the best price predicting formula using your data and calculates the target price for every part number.

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Price Driver, Quantity Target Price

Price PredictingFormula

Price Driver, Quantity &

Actual Price NLPP

€ = p0+p1x1+p2x2

€ = p0+p1x1+p2x2

NLPP calculates three price benchmarks from your data and shows which products aremore expensive (above benchmark line) or cheaper (below benchmark line) than the benchmark.

Worst-Practice25% more expensive / 75% cheaper

Target50% more expensive / 50% cheaper

Best-Practice75% more expensive / 25% cheaper

25%

75%

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Regression methods provide reliable results only if their mathematical pre-conditions are fulfilled and the method correctly capture the structure of the input data.

Only models that capture

the structure of the input

data and extract as much

information as possible

give reliable and usable

results.

It is easy to calculate many different regression models which do not capture the structure of the input data, but still calculate an (unreliable and incorrect) result for each part number.

Only correct "performance pricing models" can represent the product preferences (defined by the selection of the performance drivers) and the market situation (part numbers with parameters, quantity and price).

The methods used must extract the maximum amount of information from the input data (gain of knowledge) in order to calculate a result model with the best possible predicting power.

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Depending on your input data NLPP automatically selects the regression method & price drivers that gain most information from your input data for the best possible price predicting model.

High

Low High

Ro

bu

stn

ess

Accuracy

LPP-QR

LPP-LSM

NLPP-QR

NLPP-LSM

High data requirements & conditions

Outliers have big negative impact on result

Negative target prices possible

No math requirements on input data

Outliers don’t impact the results negatively

Negative target prices possible

No math requirements on input data

Outliers don’t impact the results negatively

Always positive target prices

High data requirements & conditions

Outliers have big impact on result

Always positive target prices

LPP-CR NLPP-CR

linear non-linear

No math requirements on input data

Outliers are handled

Negative target prices much less likely

No math requirements on input data

Outliers are handled

Always positive target prices

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NLPP’s unique & advanced calculation methods are necessary in 96% of all real life cases to get the best analysis results. The simple & common LPP-LSM approach only applies to 4% of all cases.

4%6%

21%

14%37%

18%

Distribution of “Best Method”

LPP-LSM LPP-QR LPP-CR

NLPP-LSM NLPP-QR NLPP-CR

Base: 107 data sets from different industries for different part groups

NLPP-QR method (37%) has more share than all LPP methods (31%) together

In the LPP cases, LPP-CR has a significant higher share then any other LPP method

The “normal” LPP-LSM method is only the best method in 4% of all cases, in 96% of all cases, one of NLPP’s unique advanced calculation methods gives a better predicting model

Notes

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A statement like "LPP-LSM may not give a perfect result, but still good enough" leads to the use of unrealistic results and puts operational purchasing at a high risk.

Unrealistic models

calculate random target

prices and therefore also

random potentials

savings.

96% chance that LPP-LSM models are unrealistic.

An LPP-LSM would be significantly more unrealistic (≧ 20,000 times) in almost all cases than the best NLPP model.

Results calculated with unrealistic models have random characteristics and weigh the user in false security.

An unrealistic model uses only a fraction of the information contained in the input data.

Good Input ⇾ Bad Output

„If all you have is a hammer, everything looks like a nail“

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To find potential savings and to calculate price predictions NLPP offers many advantages compared with other methods.

NLPPCost analysis /

Cost structure analysis

FocusFocuses at the price

in proportion to customer valueTries to understand

the costs of the supplier

DataUses the data treasure of

many different partsConcentrates upon few part numbers

TimeResults for thousands of part numbers

are quickly available and useableApproach doesn’t scale for

many part numbers

InformationUses clearly defined & measureable

properties of parts that don’t lead to any discussions with suppliers

Makes assumptions of parameters that mostly lead to discussions

with suppliers

RobustnessGives stable and robust results with

already few and not perfect dataThe value of one parameter can strongly

influence the calculated costs / prices

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The NLPP workflow consists of a few simple steps. As result NLPP presents new evidence from your pricing and product information.

Use NLPP's analysisfunctions to drill down into your data and see what you've been missing.

Use the result to develop and effectively implement your purchasing strategy, negotiation tactics etc.

NLPP calculates the best formula in a couple of seconds and uses it to calculate target prices for all records

Import your data into NLPP and define the price drivers NLPPshould use for calculation

Compile the properties of your products which you expect to influence the price in an XLS sheet.

51 2 3 4

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With the Saphirion “Data extraction service”, we take care about the first step, so that your data quickly becomes an immediately usable NLPP model.

Ready to use NLPPmo

del

Different

Datasources

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NLPP application overview / data handling

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Records

Cluster

Workflow

NLPP application overview / result analysis

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Benchmark Potentials

Detailed Results

Interactive Graph

Your NLPP license consists of software, training and documentation. On top it covers unlimited personal access to our team of experts.

Personal access to ourNLPP expert team

Software

Training

Documentation

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NLPP’s power is best experienced in a real life environment where it can show and deliver its true value in a very short timeframe.

NLPPLife Presentation

Free NLPPDemo Analysis

NLPPPilot-Analysis

Remote / On Site

Duration 1h – 3h depending on audience size

You collect 15 – 20 records of any part group you are interested in

We do a life NLPP analysis ofyour data

We interpret the results

You get the results either as XLS export or together with a special NLPP version, enabling you to work with the analyzed data set

Remote / On Site

Duration 1h

We show you the NLPPworkflow, from data import to result

We answer all your questions

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NLPPPilot-Phase

NLPPRoll-Out

Saphirion AGAn der Lorze 9CH - 6300 Zuginfo@saphirion.comT: +41 41 55 20 21 1F: +41 41 55 20 21 2

http://www.saphirion.comhttp://www.nlpp.ch

Saphirion, the Saphirion logo and NLPP are registered trademarks.