How to Approach Pricing Amid Supply Chain Turmoil

By Zilliant

Jul 07, 2021

Although cities are opening up and cautiously returning to a semblance of normalcy after a pandemic-stricken 2020, global supply chain shortages, delays, and disruptions have significantly impacted pricing. All types of commodities, including lumber, steel, copper and even chicken, are currently seeing highly inflated prices due to increased demand driven by rebooting economies around the word.

According to a article, “The Bloomberg Commodity Spot Index, which tracks 23 raw materials, has risen to its highest level in almost a decade. That has pushed a gauge of global manufacturing output prices to its highest point since 2009.”

The question now is how long will it last? That’s where things get unclear. The articles continues, “Many economists and central bankers, from the Federal Reserve on down, maintain that price gains are temporary and will be curbed by forces such as virus worries and unemployment. Investors remain skeptical, with businesses including Nestle SA and Colgate-Palmolive Co. already announcing they’ll need to raise prices.” With no firm end in sight, supply chain disruption is substantially impacting inventory, position, and fulfillment capabilities for many B2B companies.

Therefore, being able to respond to market volatility and supply and demand changes, which we at Zilliant refer to as pricing triggers, quickly and flexibly is more critical than ever. B2B companies need to respond to these pricing triggers with data science, increased collaboration and communication, and price optimization technologies to mitigate detrimental margin effects and enable better financial outcomes when facing volatile market conditions and supply chain disruption.

Let Data Drive Decisions, Not Instinct Alone

B2B sellers and pricing analysts can sometimes make misguided decisions based on market volatility and fear of business loss, which often results in impulsive price cutting to recover lost volume. This is problematic because these responses don’t take into account actual business data and will ultimately lead to mistakes. Likewise, sales teams may drop prices or override price targets based on gutfeel and instincts rather than fact.

Both leadership and sales teams must temper their instinctual responses when it comes to pricing, and instead, utilize a more informed and customer-driven approach. For B2B companies, it’s more important than ever that data is leveraged in response to pricing triggers. Data of all kinds can create valuable insights, shape commercial strategies, and provide sales teams with informed guidance and specific recommendations.

Collaboration and Communication Is Key

When it comes to supply chain disruption, silos often plague B2B companies. The reality is that supply chains are too interlinked with each department as procurement informs pricing, which informs sales and vice versa. By removing communication barriers and eliminating silos, companies can promote innovation, enable quicker feedback loops, and improve team and inter-department dynamics.

This approach can similarly be applied to external partners. A disruption for your supplier’s suppliers might set off a chain reaction with dire consequences. Improved communication between departments, vendors, and even external partners is integral to success in the face of supply chain shortages and delays.

Leverage Pricing Technologies to Execute

The B2B companies in the best position to handle a volatile market are utilizing price optimization tools to respond to pricing triggers efficiently and intelligently. With data science and a dynamic price management software, pricing teams can test different strategies, quickly make updates, and gain predictive insights on the impact different strategies will have on margin and revenue.

Additionally, by using data science-driven software to perform a “what-if” model, pricing teams can be more proactive when it comes to advising executives on possible actions and responses to market volatility that have a high likelihood of success. By leveraging customer and company data, or any relevant data source like cost indices, a proactive pricing team can make targeted changes to preserve margin even when dealing with supply chain issues.

Gain More Control Over Your Pricing Strategy

For more than 20 years, Zilliant has been leading the way with next generation pricing and sales solutions that enable companies to respond quickly to triggers in their business.

Zilliant Price IQ® and Price Manager™ provide a powerful combination: Price IQ utilizes price optimization to set market-aligned, dynamic prices that maximize revenue or margin, and Price Manager streamlines burdensome tasks, giving the flexibility and control to change pricing as market conditions change.

Take your strategy a step further with Zilliant’s Campaign Manager™ solution, which closes the strategy-to-execution gap by delivering omni-channel product, pricing, and sales guidance, and allows for the creation and management of campaigns with their own set of action types, thresholds, customer and product scopes, and talk tracks.

When it comes to responding to triggers like supply chains disruptions, Campaign Manager offers a capability that provides specific inventory actions to sales teams. If your company has distressed inventory or needs to prioritize or substitute a different type of product, Campaign Manager ensures your sales teams can act quickly, offering the right product to the right customer at the right time.

To learn more about how pricing strategy and execution can mitigate supply chain issues and providing inventory actions to sales teams with Campaign Manager™, contact Zilliant today.

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