Insight

Issue 6: A new tool for fighting supply chain disruptions

KPMG insight on supply-aware dynamic pricing

Sudipto Banerjee

Sudipto Banerjee

Principal, Pricing & Commercial Excellence Leader, KPMG US

+1-404-907-6173

Himanshu Mishra

Himanshu Mishra

Advisory Managing Director, Strategy - COE, KPMG US

+1 408-367-5764

Z. Maria Wang

Z. Maria Wang

Director Advisory, Strategy - COE, KPMG US

+1 617-988-1000

Companies can adapt to shifting supply chain realities by adjusting the price of every SKU on a monthly, weekly, or even daily basis. Informed by our analytics tool, forward-looking view of supply conditions, and demand dynamics, companies can avoid near-sighted pricing mistakes and shape demand across products, customer segments, and geographies.

KPMG Elevate C-Suite Perspective - A new tool for fighting supply chain disruptions

Properly utilizing SADP can help your company navigate today’s unfamiliar and volatile landscape, and set the stage for step-changes in pricing excellence, including organizational changes that will pay dividends for years to come in good times and bad.

Audio transcript

Welcome to KPMG’s Elevate C-Suite Perspective Series

Issue 6: A new tool for fighting supply chain disruptions

KPMG insight on supply-aware dynamic pricing

The problem:

Demand surges and an extraordinary breakdown in global supply chains are raising the cost of everything from fertilizer to silicon chips.

Even before the emergence of the Omicron COVID-19 variant, supply chain disruptions were worsening, driving U.S. inflation to 40-year highs, resulting in direct pressure on profits.

Reappearing and restructuring supply chains will take many months and major investments. But companies can use strategic pricing now to manage costs, product shortages and severe delays – and maintain or even expand margins. It’s a big leap for many organizations, especially some consumer-facing and many B2B companies that still rely on unsophisticated approaches such as cost-plus or simple index-based pricing. The problem, however, is that these and other blunt pricing methods can leave money on the table, erode brand value and create openings for competitors.

Companies can adapt to shifting supply chain realities by adjusting the price of every SKU on a monthly, weekly, or even daily basis. Informed by our analytics tool, forward-looking view of supply conditions and demand dynamics, companies can avoid near-sighted pricing mistakes and shape demand across products, customer segments, and geographies.

Properly utilizing SADP can help your company navigate today’s unfamiliar and volatile landscape, and set the stage for step-changes in pricing excellent, including organizational changes that will pay dividends for years to come in good times and bad.

Your next steps:

KPMG’s comprehensive SADP framework aims to, among other things, avoid common pricing mistakes (an important step in building pricing maturity). Make sure to steer clear of these five pitfalls:

  1. Letting concerns about short-term issues, such as temporary stockouts or supply shocks, drive price changes that could have negative long-term effects.
  2. Blanket increase of list prices across the board without offering promotions, trade terms or other direct or indirect demand-shaping measures.
  3. Approaching pricing only from the top down at an aggregate category or brand level.
  4. Seeing price changes as separate from product portfolio considerations including assortment, innovation, and SKU and service offering adjustments.
  5. Making pricing a purely business process without investing in technology, training and new and more integrated ways of working.

To learn more about SADP, please download the KPMG report, “Pricing in an era of turbulent supply chains and rising costs.”


 

Elevate C-Suite Perspectives

View all of our insights and point-of-views

View all of our insights and point-of-views