For distribution companies striving to sell their products under turbulent market conditions, streamlining their complex pricing processes with automation is a bare minimum for staying ahead. So, what does pricing automation entail in the distribution industry, and which key areas require automation to ensure long-term profitability in your organization?

Here at Pricefx, as a leading enterprise-level pricing software vendor with many distribution companies among our key customers, we acknowledge the difficulty of setting prices amid high fuel and transportation prices, inflation, supply chain disruptions, and other global issues of the day – and this is all while striving to keep increasingly price-sensitive customers happy.

Here is where price automation comes in. In this article, we will walk you through the 4 major ways (with the use of hypothetical mini case studies) large-scale distribution companies can bring automation to their pricing setup, how they will benefit and be in the best position to scale their businesses model when the time comes.

So, let's dive in!

In this section, we will delve into a mini-case study to illustrate how automated supplier cost management solutions can benefit distribution companies:

Mini-Case Study: Managing Fluctuating Supplier Costs

The Challenge

Consider a distribution company that specializes in industrial equipment and supplies, serving customers across multiple regions. With a diverse product portfolio and fluctuating supplier costs, the company faces challenges in maintaining competitive pricing while ensuring profitability. Manual processes for updating prices based on supplier cost changes result in delays and errors, leading to margin erosion and customer dissatisfaction.

The Automated Solution

By implementing automated supplier cost management solutions, the distribution company streamlines the process of updating prices in response to supplier cost fluctuations. Leveraging blended cost calculations, the company can accurately determine the weighted cost average for on-shelf products, enabling precise margin calculations and pricing adjustments.

Furthermore, automated price recalculations based on new supplier cost information ensure that prices remain competitive and aligned with market conditions in real-time. Integrated with third-party systems like ERP (Enterprise Resource Planning software), these solutions facilitate seamless synchronization of cost-based price updates across all sales channels and regions.

With automated approval workflows built into costing grids, the distribution company gains increased visibility and control over margin-draining cost elements. This allows for quick reactions to cost changes and ensures that pricing decisions are based on accurate and up-to-date information.

The Beneficial Results of Automation

As a result, the distribution company experiences improved profitability, enhanced pricing accuracy, and greater agility in responding to market dynamics. By leveraging automated supplier cost management solutions, the company can effectively manage costs, maintain competitive pricing, and drive sustainable growth across its operations.

In the fast-paced world of distribution, staying ahead means swiftly adapting to market shifts and supplier cost changes to maximize revenue growth.

Mini-Case Study: Overcoming Price List Update Horror Stories

The Challenge

Consider a distribution company operating in a dynamic industry where pricing adjustments are frequent, occurring across multiple market segments on a daily, weekly, or monthly basis. The challenge lies in the complexity of recalculating and communicating these updates efficiently, risking errors and potential margin leakage.

The Automated Solution

To overcome these hurdles, the distribution company implements a robust pricing update capability that enables real-time adjustments triggered by new input variables and recalibration logic. This solution seamlessly integrates with their ERP systems, ensuring a seamless loopback mechanism for accurate pricing implementation. The benefits are significant, with increased margins stemming from more frequent and expedited price updates, addressing the challenge of margin compression, and reducing manual errors.

What’s more, you can leverage the ability to evaluate options for price changes swiftly and simulate the impact of mass price changes across various dimensions like product, customer segment, and geography. This capability involves a seamless connection to your CRM (Customer Relationship Management), ERP, or other systems for the efficient execution of updated price lists and customer specific pricing.

The Beneficial Results of Automation

The benefits of such a capability are multi-faceted, encompassing improved margins through frequent and strategic price revisions, reduced margin compression by minimizing manual errors and ensuring timely pricing updates, and increased margin with decision support.

Success metrics are measured through improved margins and enhanced price realization resulting from agile pricing changes, ultimately driving revenue growth and market competitiveness. By embracing this strategy, the distribution company not only safeguards its margins but also capitalizes on revenue opportunities in an ever-evolving market landscape.

Mini Case Study: Streamlining Pricing Strategy Design in Distribution

The Challenge

In the fast-paced world of distribution, the ability to swiftly adapt pricing strategies to changing market conditions is crucial for maintaining profitability and competitiveness. Imagine a distribution company facing evolving customer preferences, market dynamics, and competitor activities, constantly challenging its pricing strategies. Traditionally, designing and deploying pricing strategies involved costly technical support for coding and testing, hindering the distributor's reactivity to market forces and draining resources.

The Automated Solution

To tackle these challenges, the distribution company can implement a no-code pricing strategy design tool, empowering pricing managers regardless of their technical expertise. Enter the Strategy Designer, a visual configuration tool that revolutionizes pricing strategy design and deployment. Pricefx's Strategy Designer, a use case of Visual Configuration, is a visual pricing design tool that redefines the skillset required for setting up new pricing strategies and how long this process takes. With its intuitive drag-and-drop interface, Strategy Designer democratizes the process, allowing anyone from business analysts to pricing managers to design and deploy pricing strategies seamlessly.

The Beneficial Results of Automation

Using Strategy Designer, distributors can expect faster strategy design, improved pricing effectiveness, and instant deployment of new strategies across their systems. By reducing reliance on specialized coding skills and streamlining the testing process, Strategy Designer enables distributors to respond quickly to market changes, ultimately driving revenue growth and cost savings. With Strategy Designer, distributors can track success through metrics like revenue growth and cost savings, ensuring a competitive edge in today's dynamic market landscape.

Mini-Case Study: Streamlining Rebate Management in Distribution

The Challenge

In the ever-changing distribution industry environment, aligning rebate programs with overall business objectives is paramount for revenue growth and customer retention. Picture a distribution company striving to implement rebate programs to incentivize specific customer behaviors. However, the complexity of managing rebate programs poses significant challenges, requiring coordination across various departments and stakeholders.

The Automated Solution

To address these challenges, the distribution company adopts an integrated framework for rebate management. This framework streamlines the entire rebate process, from establishment to payout execution, ensuring efficiency and alignment among sales, pricing, and finance teams. By consolidating rebate establishment, approval, documentation, accrual setup, and performance monitoring into a cohesive system, the company eliminates manual interventions and enhances overall effectiveness.

The Beneficial Results of Automation

The benefits of this integrated approach are evident in the company's ability to achieve or surpass performance targets related to volume growth or business retention. Key performance indicators (KPIs) focus on monitoring rebate performance against targeted objectives, allowing the company to assess rebate effectiveness and make informed decisions based on performance metrics.

By simplifying the rebate process and aligning it with strategic business goals, the distribution company enhances its competitiveness and drives sustainable growth in the market.

Learn more here about how Pricefx together with Enable can help your business streamline its revenue management:

Now you know how pricing automation has emerged as a crucial tool for distribution companies striving to navigate the complexities of today's market landscape. By streamlining pricing processes and leveraging automation tools, companies can optimize their pricing strategies, streamline operations, and maximize profitability.

From efficient and strategic management of supplier costs, list price recalculations to automatic recalculation of dependent price lists, no-code pricing strategy design and automating accurate rebate accruals and payouts, the pricing automation offered by a quality solution like Pricefx supplies a myriad of benefits for distributors.

But what is the best way to get your sales team on board with using the technology to find those pricing insights? If you want to know how to make your sales department groove to your organization’s overall pricing rhythm, do not miss this useful article below:

Meanwhile, happy automated and data-driven pricing!