Profit Margins Hit Hard As Pricing Tries to Address Supply Chain Disruption
North American organizations will lose out on almost $1 million every year in lost profitability, as a result of supply chain issues, according to a recent study conducted by Forrester Consulting on behalf of intelligent pricing platform, Flintfox International.
The study has found that organizations with outdated practices around pricing will struggle to navigate the complexities of unpredictable supply chains. 2022 will see business model transformation pushed up the boardroom agenda as global change becomes increasingly unpredictable, with over half (56%) of North American businesses claiming that poor data quality and capture is hampering the ability to keep on top of market fluctuations.
“After the continued uncertainty of the pandemic, margins have never mattered more," said John Moss, CEO, Flintfox in a statement. As inflation and supply chain issues continue to wreak havoc, it’s becoming increasingly critical for businesses to be able to respond rapidly to market fluctuations. Moving to an intelligent pricing model will enable businesses to better handle operational complexities and future-proof their businesses from harmful market events.
Profit margins scrutinized amid slow supply chain recovery
As the U.S. and Canada continue to face ongoing supply chain issues caused by Covid-19, coupled with some of the worst inflation seen in decades, the research has highlighted the challenges facing retail, manufacturing and consumers goods industries. Hit severely by a slow supply chain recovery, they are undergoing a period of transition where profit margins have come under intense pressure.
Pricing strategies forced to undergo transformation
Due to the impact of the pandemic, 59% of North American firms renewed their focus on creating a pricing strategy that maintained demand and managed margins. 68% want their pricing initiatives to help them stay ahead of complex pricing changes at all stages of the supply chain.
However, 87% of these businesses report that Covid has had a critical impact on the ability to manage pricing across their product range, with 34% stating they are unable to keep up with the scale of real-time price fluctuations occurring in the market.
This is having a significant knock-on effect; with North American businesses losing on average $964,284 a year in lost profitability due to their inability to respond quickly enough to market forces.
Margin management seen as a key growth driver
Existing business models are preventing businesses from being able to manage the pace of change, with 26% still relying on manual processes to manage price fluctuations.
The research indicates that a shift to real-time, automated management of pricing, will be a fundamental business priority to manage the impact of global disruption in the year ahead, with over one in five ( 25%) of North American businesses set to invest in intelligent pricing technology in 2022.
North American businesses have a huge amount to gain from intelligent pricing, with almost 70 hours a day being wasted by manual updating and amending of pricing.
