Developing a Pricing Strategy Using MODAPTS for a Specialized Consumer Goods Client
June 25, 2025
Developing a Pricing Strategy Using MODAPTS for a Specialized Consumer Goods Client
Erica Smith |
Project Summary and Scope
A global manufacturing and distributing company specializing in producing engineered surfaces and laminates reached out to PMC to gain a comprehensive understanding of their product routing, to assess the current products and processes, and enable them to develop an effective pricing strategy. The scope of the study included two manufacturing facilities in the USA, each with three departments. Each department had multiple product routings—these are predefined sequences of operations that guide a product through its entire manufacturing process, from raw materials to the final finished goods.
To develop an effective pricing strategy for multiple products across two facilities, it's essential to first understand the typical manufacturing costs and how those costs are broken down. PMC and the client worked together to understand that the resource and operational costs were contributing 60% of the total cost to make an engineered surface product.
Resource costs are associated with labor, machinery, and materials, while operational costs typically encompass utilities, maintenance, and other overhead expenses.
![[your-subject]](https://prodmodcorpstg.wpengine.com/wp-content/uploads/2025/06/Cost-Breakdown-Production-Modeling-Corp-25.png#5349)
Typical cost breakdown of an engineered surfaces facility
Challenges
The rapid growth of the industry over time, combined with increased demand for home renovations during COVID19, and supply chain challenges, have all made resource and operational costs more dynamic, rendering current cost calculation standards outdated. The client also confirmed that the standards for resource and operational cost calculations had not been updated in recent years.
The client faced several challenges in updating the cost standards. One significant hurdle was product variation (around 500), which made it difficult to determine which products should be studied to establish representative standards. Additional challenges included tracking production schedules and routing, limited visibility into material flow, unrecorded downtime data, and scalability issues.
Opportunity
The key objective was to analyze the existing processes, map the material flow, study the cycle times, and resource allocations of each product routing to gain quantifiable insights to accurately estimate the cost to make a product.
![[your-subject]](https://prodmodcorpstg.wpengine.com/wp-content/uploads/2025/06/Production-Modeling-Corporation-aiding-the-decision-making-process-1.jpg#5350)
PMC’s Top Down Approach
Product Pricing:
The client needed to update their product pricing, and the wide variety of products made it challenging to categorize and price them effectively. PMC analyzed their product types, operations, and resource allocations to determine a quantifiable factor for calculating the operational cost, which supported determining the product pricing.
Tracking Product Routings:
The existing documents on the product routing data were outdated across all the departments due to the growth of demand over the years, the installation of new machines with advanced capabilities, and a lack of process owners/ Continuous Improvement engineers to document it. PMC’s Industrial Engineering department partnered with the client to mitigate the gaps in this data and develop a documentation framework by conducting a thorough analysis of the current state production process.
Limited Material Flow Visibility:
Due to the existing outdated tracking of product routings, material flow data recorded across the production departments was inconsistent. PMC performed a detailed study on the material flow by mapping the current production process through all departments and inventory locations, identifying key touchpoints, and recording the movement and handling of materials at each stage.
Unaccounted Down Time Data:
The firm struggled in accurately accounting the actual production lead time and addressing the downtimes and bottlenecks which resulted in suboptimal resource allocation. PMC identified these gaps by conducting more accurate time studies to ultimately improve asset utilization and process efficiency.
Approach
PMC created a comprehensive database tailored to each route present in both plants. The database mapped the production process for all the parts within a given route, listing all process steps and their respective cycle times throughout production.
![[your-subject]](https://prodmodcorpstg.wpengine.com/wp-content/uploads/2025/06/Production-Modeling-Corp-Phases-25.jpg#5351)
- Routing Data: The production process across both plants included approximately 500 product routings. While the plants have similar processes, the routes differ. Given the challenge of analyzing all 500 routings within a limited timeframe, PMC—working in collaboration with the client—prioritized 78 routings that represented the highest-volume products and the most complex processes in terms of workflow and resource allocation.
| Department | No. of Routings in Plant 1 | No. of Routings in Plant 2 |
|---|---|---|
| Thermosetting Resin Treatment | 11 | 10 |
| Decorative Surface Treatment | 13 | 10 |
| Assembly and Fabrication | 18 | 13 |
- Operational Data: In this case, information regarding the plant layout, production departments, product types, routing details, Bill of Materials (BOMs), production schedules, resource downtimes, and operator schedules were provided by the client.
Categorizing Product Attributes: Given the wide variety of products produced at the facility, they were categorized into product families based on the similarity in the process steps and product attributes for each routing. - Data Collection: Due to the limited information available on the existing data, PMC gathered data on raw materials, storage locations, and capacity, and tracked the production processes at the shop floor on both plants across all three departments. This involved gathering production schedules, work orders from the floor supervisors, resource allocations, machine parameters, and material flow, including storage and handling.
- Process Mapping: After gathering data on schedules and work orders for a typical production day, PMC identified the routing information of the scheduled parts using the client’s ERP system. The parts were then tracked throughout production to document their process and material flow. This approach enabled the identification and recording of various product types under different routings to map their process.
- Time Studies: PMC conducted a detailed time study on all three departments by using MODAPTS for manual processes and video capture, traditional time studies, and machine parameters for machine processes at both plants. The process times were collected for different product categories based on the established classification (step b).
- Documentation: PMC developed a document format by combining the time study and process flow data collected. It organized times collected using different methodologies in the sequence of operations to determine the cycle time at each process step. Once the format is finalized, a routing catalogue was developed.
- Product Routing Catalog: Following the data collection and time studies, PMC developed a database tailored to specific routings. Each sheet outlined the process flow, including the cycle time and resource allocation for processing a given unit of product. These operations were further broken down into multiple sub-operations involving material handling, manual, and machine operations. Additionally, the sheets incorporated operator and machine downtimes, aligned with the data supplied by the client. This comprehensive approach ensured accurate tracking of the production process, efficiency, and resource allocation.
Solutions
- Material Flow: From this study, PMC was able to deliver a clear visibility of the material flow specific to each route in scope. The results included all the process steps involved in producing any specific part in a given routing. This also helped the clients to get an understanding of the current material and process flow, accounting for all the resources involved in the production process.
- Routing Catalog: The Routing Catalog developed by PMC detailed the product types in each routing and outlined the process steps required for production. Using this data, PMC calculated the overall production time per unit, identifying bottlenecks and delays at each process step. This analysis provided the clients with a clear understanding of their routing details and areas needing improvement. The sheet further categorized the cycle times into value-added and non-value-added times, allowing the client to enhance process efficiency by eliminating the non-value-added steps. The catalogs were designed to be extendable to all product routings beyond the current scope by utilizing the standard calculations for various product types, categorized based on the product attributes. This approach guaranteed precise monitoring of the production process, which can help clients determine optimal operational costs by identifying areas for cost reduction and improvement.
Benefits
PMC conducted an extensive analysis of the clients production processes, providing clear visibility of the current routing data, cycle times, and material movement. Through this work, PMC developed a routing catalog that detailed all the process steps, enabling accurate product tracking, resource allocation, and precise cycle time calculations. The study also highlighted areas of improvement by identifying the bottlenecks and categorizing cycle times into value-added and non-value-added activities.
In the future, the routing catalog can be scaled to create similar ones for the routings beyond the current scope. Using the standard calculations from the existing catalog and categorizing the products within the new routings based on the product attributes, new catalogs can be generated.
Based on these sheets, the client gained a deeper understanding of their production processes, allowing them to enhance efficiency, eliminate waste, and optimize resource utilization.
This structured approach provides improved process transparency, leading to better decision-making for continuous improvement and reduced operational costs. By utilizing the detailed cycle time and resource allocation data, the client can accurately calculate the material, machine, and labor costs. Ultimately, this can provide insights for clients to create a data-driven pricing model that aligns with their production costs while maintaining profitability.
Erica Smith
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