For auto parts manufacturers, what was supposed to be a rebound year in 2022 has so far instead been anything but. Supply chain issues are once again rearing their ugly head, including a chip shortage that shows no sign of slowing down. Piling on, a pandemic-driven labor crisis and, more recently, Russia’s invasion of Ukraine have caused even more pain for an already stressed supply chain. “Leoni AG, which makes wire systems in Ukraine that it ships to European auto makers, last week shut its two factories in Ukraine and sent the roughly 7,000 employees home,” according to the Wall Street Journal.
This same geopolitical strife is also having a major impact on global commodity prices. For auto parts manufacturers, the price of metals, specifically steel and aluminum, are rising at an alarming rate due to production and, unsurprisingly, supply chain issues. “Ukrainian steel mills rapidly wound down when hostilities started. Inventory held at the mills and ports is largely moribund due to a lack of civilian road, rail and shipping services,” reports Metal Miner.
While a disrupted supply chain and highly volatile market prices are beyond any manufacturer’s control, it’s critical to double down on what can be controlled. How quickly and flexibly can your business respond to pricing or market triggers? Auto parts manufacturers need to respond to these triggers with data science and more efficient price management technologies to mitigate detrimental margin effects and enable better financial outcomes. Read on for a closer look at how to intelligently respond to these seemingly monumental challenges.
Supply Chain Apathy to Supply Chain Action
On a recent episode of the B2B Reimagined podcast, Chief Executive Officer and Founder of Capital Pricing Consultants Lydia DiLiello noted that many commercial leaders were apathetic about supply chain turmoil. “I think the apathy comes from a feeling of helplessness, of not knowing what to do next to try and find any short-term fixes to buy them a little breathing room,” she said.
Unfortunately, what drives this sentiment of apathy for many manufacturing companies is the lack of ability to flexibly respond to supply chain issues due to overreliance on manual processes and legacy tools. When overly cumbersome spreadsheets and a rigid ERP system are used to execute pricing, sales or other commercial guidance, many companies are finding them not nearly flexible enough to handle the task at hand. Instead, manufacturers need to respond intelligently and quickly to supply chain disruption with a proactive pricing strategy driven by data and intelligent software.
Using Data for Informed Decision-Making
A comprehensive and rapid consumption of data is critical to tackling supply chain challenges because it allows for informed decision-making when it comes to pricing. “Nervous field sales reps may start dropping prices to the floor preemptively or overriding price targets based on fear rather than fact. To offset this tendency, they need guidance informed by data and objective guardrails to limit this behavior,” writes Zilliant General Manager of Commercial Excellence Barrett Thompson in an article for InsideBigData.com. Comprehensive visual analytics offer a look at recent revenue performance, customer transaction history, and selling prices. These analytics also allow for a more granular view to determine which prices need to be updated or remain the same.
Resiliency through AI and Pricing Software
When it comes to supply chain disruption, manufacturers have an opportunity to be more financially resilient via more optimal pricing. Manual processes and tasks make it nearly impossible to keep up with drastic cost changes, update price agreements in mass, predict the impact of price changes, and swiftly change course as the market demands.
Leading manufacturing companies can rapidly respond to supply changes because they have tools in place to perform these actions efficiently and intelligently. When costs change dramatically, pricing teams need to rapidly calculate cost pass-through at scale, including determining pass-through strategies at specific product and category levels, while at the same time, measuring price elasticity to set pricing that’s aligned with micro-segments in the business.
Price optimization and management software allows for the agility to test different strategies, quickly implement updates in a centralized hub, and accurately predict the impact different strategies will have on revenue and margin. In his InsideBigData.com article, Zilliant General Manager of Commercial Excellence Barrett Thompson continues, “The ability to perform ‘what-if’ modeling allows pricing departments to be proactive. By understanding where customers are historically sensitive and where they aren’t, a proactive price manager can make targeted changes at the category level that preserve margin without decreasing sales.”
Counter Market Volatility with Dynamic Pricing in Real-Time
A necessary question that every manufacturing company should be asking themselves is, “When costs change, how quickly can I update prices across the business and across channels?”
When it comes to responding to market-driven cost changes, time is of the essence. Unfortunately, most B2B companies are relying on manual tools such as spreadsheets or discrete business intelligence tools to manage prices, then rely on IT teams or other system managers to upload new guidance in systems including ERP, CPQ, eCommerce, CRM, and order entry systems. This process can take anywhere from 6 weeks to 4 months. The fact is that costs can change daily, and the status quo process is simply too slow.
Become More Dynamic
The good news is that end-to-end pricing solutions are enabling B2B companies to be much more dynamic. Pricing teams are dynamically bringing in an unlimited amount of data such as cost, competitive, inventory, web data and more to inform their strategies. With out-of-the-box scenarios for common pricing challenges, it’s now even faster for pricing teams to follow templates for cost pass-through, global and country price list adjustments and exchange rate. Out-of-the-box scenarios pull in all the necessary strategies, supporting data, and analysis so that you can make prices updates faster on all or a subset of your prices.
In fact, on a recent Q4 2021 earnings call, a Zilliant customer announced that their partnership with Zilliant would allow them, “to be more responsive to market changes by dynamically optimizing prices based on over a dozen different inputs to drive margin or volume, as appropriate.”
Calculate and Deliver Prices in Real-Time
In our digital age, speed is critical when it comes to updating prices as costs change, and many leading B2B companies are leveraging the power of a real-time pricing engine. Traditionally, pricing engines have existed within ERPs and house the data and logic that generate the final price that is presented to a customer in any channel. However, as transactional volume is increasing in an omnichannel setting, customers expect instant pricing which reflects market realities that the ERP is often unaware of, such as inventory level or a competitor’s price. Additionally, the number of calls and calculations needed in complex omnichannel environments, and their degree of pricing sophistication, completely overwhelms the traditional ERP system.
Zilliant’s Real-Time Pricing Engine™ meets the growing need for a faster, more robust way of handling the pricing demands of complex omnichannel B2B companies. The solution instantaneously executes complex pricing logic, and performs complex calculations, including external data lookups, to deliver prices to any ERP, CRM, CPQ, eCommerce platform or mobile application. In the announcement about the launch of our Real-Time Pricing Engine, Zilliant President and Chief Executive Officer Greg Peters said, “Companies seeking to be more dynamic in their approach to pricing are no longer constrained by the limitations of legacy systems. With real-time pricing, they can execute complex pricing calculations in milliseconds.”
See Pricing Software in Action
With unprecedented supply chain disruption and market volatility, these are challenging times for auto parts manufacturers. Fortunately, Zilliant is here to help B2B companies tackling pricing challenges through flexible price management software and a dynamic pricing engine.
Join our Zilliant Demo Series session on Wednesday, March 16, at 9:00 a.m. CDT / 4:00 p.m. CET to learn how Zilliant solutions help B2B companies address inflationary, supply, and market-driven pricing challenges. On the agenda: managing global country list prices, automating cost pass-through processes, delivering prices into any commercial system in real-time, and much more.