An analysis of the information systems used to support the cost estimation and pricing processes

Abstract

Despite being crucial to all sorts of companies, the pricing process is difficult to be performed due to the several factors, which must be considered when defining prices. In make-to-order (MTO) companies, pricing is even more complex because of the peculiar nature of the transactions that these companies perform with their customers. The MTO companies offer highly customized products and usually compete among thenselves for the clients orders. The first stage of the pricing process is always the estimation of all the manufacturing costs. These costs, if incorrectly estimated, lead to inaccurate prices. Besides the cost estimates, many other factors must be evaluated in order to have the price decisions carried out correctly. These factors can be internal or external to the companys control. The evaluation of these factors is crucial to have prices that are competitive and compatible to the costs. Therefore, MTO companies need precise information so their managers can be able to make reliable decisions taking into consideration all relevant information to the definition of prices. The main objectives of the research described in this paper were (1) to analyze the decision-making process related to cost estimation and pricing, and (2) to verify if the decision support systems used by these companies to aid their managers are adequate and if there are information needs not fulfilled by such systems.