The main aim of pricing and revenue management in a food distribution supply chain is to create a balance between supply and demand, while simultaneously optimizing profits. Traditionally, businesses would tweak the availability of their assets. However, in this day and age, revenue management has adopted a different approach. One that focuses more on pricing as the main tool for leveling out supply and demand.
As a more universal approach, this type of pricing and revenue management in a supply chain has proven to boost profits more efficiently. It’s a winning strategy for companies across a number of industries, including manufacturing, food distribution, and wholesale. Let’s dive into how and why you would adopt this approach for your own company using food distributors as an example.
Balancing supply and demand
Individually, both supply and demand can be adjusted using several different strategies. For supply, this could include changes to your inventory, while demand is usually generated by marketing efforts.
Pricing management is the process that ties supply and demand together by focusing on strategies designed to strike a balance between the two. Working with limited supply chain assets, both in terms of capacity and inventory, pricing and revenue management in a supply chain use pricing as the key tool for optimizing profits.
For food distributors, margins are extraordinarily tight, making accurate pricing crucial to making any money at all. Food distributors often deal with weekly (sometimes daily) price fluctuations. Rockton Pricing Management combined with Acumatica Cloud ERP makes it easy to manage pricing for any number of items with ease, and it will deliver real-time, accurate pricing to your customers.
Increasing the profit margin
There are several revenue management strategies to choose from, depending on your industry and business model. You can focus on the timing of your pricing, targeting different customer segments or adjust rates based on product or service availability.
Each of these approaches to pricing and revenue management in a supply chain can significantly increase profits. Which one you choose is largely based on the nature of your offering. Perhaps your value proposition is different for different audiences. Or maybe the demand for your products or services spikes during certain seasons. You could even adjust pricing based on individual versus wholesale purchases.
Rockton Pricing Management combined with Acumatica Cloud ERP allows for automated dynamic pricing. Instead of setting up a “price class” for each item or customer, food distributors can set up a price schedules one time and let the pricing tool do all the calculations for them automatically.
Seasonal pricing and revenue management in a food distribution supply chain
Manufacturers and food distribution companies selling season-specific products rely on revenue management tactics to balance out their supply and demand between peak times and the rest of the year. One winning pricing strategy for optimizing profits in this area is fluctuating between higher prices when demand spikes, and reduced prices in off-peak periods. This way you’re encouraging customers to shift their demand, which in turn allows you to maintain the efficiency of your supply chain.
By making this shift as well you are not stuck with excess inventory at certain times of the year and you can maintain consistent cash flow for these items.
Acumatica Cloud ERP with Rockton Pricing Management has a solution when considering food distributors. With date-driven pricing, you can assign valid date ranges to price lists. This way you will always get the right pricing at the right time, any day and every day.
Revenue management of bulk and spot customers
Most products can be offered individually at a higher price (spot sales) or in bulk at a lower rate. Effective pricing and revenue management in a supply chain strikes the right balance between the two, ensuring wholesale companies are bringing in optimal profit from their offering.
One way to achieve this is through in-depth customer segmentation. Acumatica Cloud ERP includes a built-in Customer Relationship Management (CRM), which enables a full view of customers and vendors. Critical data can be gathered and analyzed with this tool, creating more defined customer segments. With specific segmented parameters, a business can test pricing options, focus on the most profitable customers, or upsell and cross-sell other products or services.
Strategic inventory management is also an important aspect of revenue management. Food distributors commonly deal with perishable goods, and will appreciate Acumatica Cloud ERP’s real-time inventory management.
Not sure where to start?
It does take an all-hands-on-deck approach. All teams need to be on the same page to be able to execute an effective pricing and revenue management strategy.