Learn how electrical products manufacturers can intelligently and profitably mitigate the effects of falling material costs with pricing software.
Electrical Products Manufacturers Face a New Challenge in Falling Metals Prices
On top of the challenges of inflation and supply chain issues, the electrical products manufacturing industry has also seen a slight decline in demand. “Last month's increase reflected a 1.1% rise in machinery orders. There was also strong demand for primary metals as well as computers and electronic products. But orders for electrical equipment, appliances and components fell 0.9%, while demand for fabricated metal products was unchanged,” according to a recent report from Reuters.
The electrical products manufacturing industry is now having to face a new challenge - falling metals prices. While steel and copper prices skyrocketed as the worst of the pandemic receded, prices have since plunged. “Prices are plummeting as worries about a slowdown in industrial activity across major economies dovetail with slumping demand in China,” according to Bloomberg.com.
In this blog, we’ll examine why price optimization and management software can help profitably mitigate the effects of falling material costs and offer some additional Zilliant resources with insight into how manufacturers can intelligently respond to extreme market volatility and inflation.
Why it’s Critical to Intelligently – and Quickly – Respond to Cost Volatility
It’s no secret that the costs of raw materials typically used in electrical products often fluctuate on the open market. For electrical products manufacturers, this is particularly challenging because there is a lag time between bid and project execution, and material costs may increase or decrease in the intervening period. In fact, many manufacturers only update costs in their ERP once a year, and if costs have significantly increased, it can result in margin loss. Additionally, for companies that rely on legacy systems, updating prices in an ERP is often a significant and time-consuming technical challenge.
Being ill-equipped to update prices as quickly and as frequently as costs change will ultimately lead to margin loss. Electrical products manufacturers must respond to frequent cost changes with confidence by leveraging new cost data in real-time and automating pricing processes. That’s why it’s now more critical than ever for commodity-driven B2B manufacturers to leverage the power of pricing software.
Eliminate Guesswork with Pricing Software
In a period of falling costs and softening demand, the biggest challenge is determining how to drop prices far enough without going too far. Advanced price optimization and what-if scenarios, both features in Zilliant’s Next-Gen Price IQ® solution, allow you to leverage data to calculate price elasticity at a granular level. This includes determining the specific attributes that result in varying degrees of price elasticity within small microsegments of the business. Identifying and understanding these variables is the key to knowing how far is too far when adjusting your prices. Best of all, this approach allows the pricing team to test out various pricing strategies and see how they will impact margin and volume before publishing prices.
Additionally, price management software makes it straightforward to bring in new cost data, adjust price lists and immediately publish the new prices as fast as costs change. For global electrical products manufacturers, updating prices when costs change using manual tools can be even more challenging. It is no longer manageable to manually aggregate cost and other reference data, make updates to global price lists in spreadsheets, email spreadsheets to various country pricing managers, make more manual updates to account for currency exchange and other country-specific adjustments, and wait on technical resources to update the pricing system of record with new list prices. Managing global and country price lists with price management software is key to updating prices in a global environment and maintaining profitability.
Automating Processes is Key
Conducting a manual analysis to review and approve pricing for every line item on every bid is an immense challenge, not to mention time-consuming and vulnerable to human error. Pricing software can close this gap, and for electrical products manufacturers, can help reduce a backlog of incoming bid requests using Intelligent Automated Negotiation. Not only can Zilliant’s Real-Time Pricing Engine™ deliver prices in real-time to an ERP, CRM, CPQ, eCommerce, or any other commercial system, it can also perform complex price calculations and automate negotiations when used in conjunction with price optimization and management software.
Intelligent Automated Negotiation sets pre-defined rules on what prices can be auto-approved without human intervention – giving sales reps and customers on digital channels the flexibility to negotiate within a range of prices that still maintain necessary margin levels and escalates quickly and efficiently when needed.
Essential Zilliant Resources for Tackling Market Volatility and Inflation
As material cost volatility and inflation continue to plague today’s business landscape, B2B manufacturers need to be able to respond and combat these challenges with speed, precision, and intelligence. Below is a round-up of essential Zilliant resources that can help you gain insight into powering intelligent commerce during uncertain times.
- [WEBINAR] Apply Pricing Software in Commodity-Driven Industries
Watch this webinar to discover how pricing software can help dynamically bring cost data into your pricing model and learn strategies for analyzing, updating, and publishing new prices as quickly as the market changes.
- [DEMO] Quick Start for Global & Country Price Lists
Watch this demo to learn how Zilliant's Quick Start package for Global and Country Price Lists allows pricing teams to easily update global list prices as costs change using pre-defined cost pass-through strategies.
- [WHITEPAPER] Inflation and Pricing: Time is of the Essence
Read this whitepaper to discover four battle-tested inflation response strategies, and learn how to be surgical when increasing prices while incentivizing the right behavior from sales reps.
- [PODCAST] The Need for Speed: Overcoming Economic Volatility
Listen to this episode of Zilliant’s B2B Reimagined podcast to hear Holden Advisors Vice President of Pricing Jeet Mukherjee discuss the importance of making faster decisions and not being afraid to fail in the short term to capture long-term stability.
Contact us today to learn more about how Zilliant can help electrical products manufacturers tackle cost volatility with our market-leading B2B price optimization solution, Next-Generation Price IQ.