In this Supply & Demand Chain Executive article, Zilliant Senior Vice President of Professional Services and Customer Success Rick Chappel covers a three-step plan that relies on data, people and technology, because in order to navigate the supply chain impacts of this pandemic, surgical pricing and cost management will become even more important.
Market forces have created an existential inflection point for many B2B manufacturers, distributors and service providers with respect to the global supply chain, forcing them to rethink logistics and supply and demand dynamics on the fly.
Many of these considerations have implications for pricing and, when addressed thoughtfully and intentionally, pricing science can serve to better manage volatile conditions. From inventory positions and fulfillment to the seismic shift from in-person sales to digital channels, reimagining the traditional pricing approach can mitigate detrimental margin effects. Here’s how pricing implications and reimagined strategies can lead to better financial outcomes.
When the business impacts of the Coronavirus disease (COVID-19) hit, companies found themselves starting from wildly different inventory positions. Some were heavily stocked, while others were not. Distributors that adhere to a just-in-time stocking strategy wound up behind the curve, especially if their supplier partners also lacked readily available inventory. Contingency plans like a geographically diversified supplier base may shield companies from the worst upfront impacts, but the long-term reverberations of the crisis will affect even the most prepared. Communication up and down the supply chain and creative, flexible thinking is critical even for well-stocked companies with diverse supply options.
Another fluid situation involves the methods companies use for transporting goods around the world, either to supply them or sell to their customers. Companies need to keep an eye on the effect this will have on the cost of transporting goods and adjust where it makes sense. While cheaper oil is good news for some, it’s potentially catastrophic for companies who sell to the oil and gas sector or sell downstream oil products and fuel, particularly commodity products (derivative specialty products may fare better). These businesses more than ever need to have a data science-driven awareness of price sensitivity to make an informed decision about where to follow the market down and where to try to maintain margins and pricing power.
The traditional field sales model has been uprooted in the era of social distancing. As such, e-commerce has become increasingly important, yet it also further taxes shipping, transportation and logistics services. Digital Commerce 360 reports that due to “challenges on all fronts of e-commerce—from supply chain, inventory management, order fulfillment and delivery to customer service and even search engine optimization—many B2B e-commerce executives say they have never seen business conditions change so rapidly.”
Companies equipped to take orders online and have invested in a quality online customer experience, as opposed to those who have not made the effort to get their customers set up on e-commerce platforms are in a better position to serve customers and potentially
gain some wallet share. Keys to success here are rational and market-aligned pricing, personalized product recommendations, inventory availability and speed of delivery.
Though none of what we are collectively going through can be described as normal, B2B companies must move decisively to meet the moment on its terms. Reacting quickly, intelligently and with compassion from a pricing perspective is something companies can still control. Below are three immediate steps B2B companies should be taking to mitigate the current impact:
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