supply chain process

Updating Distribution Models to Regain Pricing Power

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Key Takeaways

⇨ Manufacturers can no longer afford to offer discounts like they once could.

⇨ Organizations must have clear, end-to-end visibility into their products at every stage.

⇨ To keep pace in an evolving world, businesses should leverage automation.

Though the impacts of inflation are starting to abate, many companies are still struggling to recover from cost spikes over the last year. The skyrocketing price of labor, transportation, and materials heavily squeezed margins, forcing businesses to increase prices to mitigate the fallout.

This all comes at the same time as significant supply chain disruptions have posed serious challenges for companies to overcome. In fact, SAPinsider’s recent report Building Resilient and Agile Supply Chains Leveraging Data, Analytics, and Automation found that building resilient supply chains that can respond to disruptions efficiently was a crucial priority, with 52% of respondents highlighting this as a key action, more than any other.

Manufacturers must find solutions that provide them with end-to-end visibility over their supply chains so they can regain control over their pricing and products.

Refining the Distribution Model

Amid technological advancements and evolving supply chain challenges, traditional distribution models are no longer viable. For instance, the model in which resellers and distributors received discounts to manage inventory, logistics, and last-mile delivery is no longer tenable. Manufacturers have a greater need to maintain control over their prices, and these discounts make that much more difficult.

Manufacturers are increasingly keen on tying compensation to sales figures and price realization at the customer level, reserving discounts for distributors that deliver sales at their targeted price level. Incentivizing resellers is becoming a much more popular tactic among B2B manufacturers.

Tracking Pricing Paths, Unlocking Control

In order to marry compensation to sales performance, manufacturers need to be able to have total visibility of their products as they make their way through distribution channels and into the hands of customers.

Supply chain professionals indicated this was a top requirement in SAPinsider’s recent report, with 78% of respondents saying they need integrated analytics capabilities across the enterprise. Manufacturers must be able to verify the sales and price data from their vendors to be able to make this new strategy effective. Without this information, they run the risk of leaking margins and may lose the ability to accurately recognize revenue.

Unfortunately, the complexity of channel pricing is only increasing. Manufacturers can use automation tools like those offered by Flintfox to better manage their pricing strategies to maximize revenue. By automatically managing prices, organizations can define and execute their pricing strategies much more efficiently. This allows them to maximize revenue and insulate their margins from any irregularities.

What This Means for SAPinsiders

Price Control is imperative – Manufacturers can no longer afford to offer discounts like they once could. These organizations must have clear, end-to-end visibility into their products at every stage. This allows them to properly incentivize distributors and protect margins.

Automation enables agility – To keep pace in an evolving world, businesses should leverage automation. Advanced tools can help ensure pricing strategies are sound and effectively deployed.

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