The best defense against next-gen inflation is a next-gen supply chain

By Are Traasdahl

The stress and uncertainty felt across the world over the past two years shows no signs of dissipating, with skyrocketing fuel and grocery prices, lingering COVID-19 concerns and endemic economic insecurity across the country. among companies, investors and consumers.

Inflation alone reached 8.5% in the United States last month compared to 2021, leading to a decrease in consumer purchasing power and growing worries about their personal economy – two in three Americans (64%) saying they are extremely or very concerned about inflation. They naturally turn to more affordable stores and brands, increase sales and use coupons, and buy pantry items in bulk to avoid further price increases. Leaders are also feeling the impact, having raised inflation to second place on their minds, up from 22nd just a year ago. Even for those who weathered the challenges of 2008 or the 1980s, the underlying factors fueling inflation today are unique and extreme, ranging from labor shortages and supply chain disruptions. supply to unpredictable weather events and geopolitical conflicts.

The post-pandemic economic recovery will continue to face threat after threat, challenge after challenge – brands and retailers must act now and develop more strategic and sophisticated approaches to navigate uncertainty in order to both protect and strengthen the financial health of their businesses and their relationship with the consumer.

Navigating supply chain uncertainty with data

Businesses today have exponentially better data, technology, and tools to help them tackle the challenges of inefficiencies that lead to wasted product and time. Here’s how brands and retailers can build a more modern and efficient supply chain:

Prioritize digital transformation: To specifically address high inflation, data from an ever-expanding array of sources must be ingested, standardized, integrated and accessed in real time, at a speed and scale that enables better collaboration between supply chain. But every company in the supply chain must first upgrade its own data and technology infrastructure to take advantage of modern data capabilities. Once this investment in a modern data infrastructure is in place, price optimization models based on machine learning (ML) and artificial intelligence (AI), for example, can use this vast data to identify and predict trends and interactions which can be used to evaluate and recommend pricing and promotional options.

Improve transparency to reduce waste: A lack of transparency leads to skyrocketing prices, delays, severe overproduction and severe underproduction in attempts to over-correct for the unknown. More accurate planning, execution and evaluation of pricing and promotions based on a shared set of comprehensive AI/ML data, analytics and recommendations provides a platform for more strategic collaboration between retailers and brands. Sales, marketing, category management, and others from both groups can have more substantial, authentic conversations that are strategically meaningful, locally relevant, and grounded in a shared view of timely data and insights.

Price with precision: Rather than taking a standard percentage increase for all products, pricing actions can now be tailored per item to reflect inflation exposure, consumer willingness to pay, and product differentiation. With a real-time understanding of item-level consumer demand and behavior within a competitive framework, companies can remix their price portfolio. Precision pricing can also be a tool to shift demand from one product or category to another based on supply and inventory levels.

Promote with personalization: Promotions have been filed for much of the pandemic, increasing the average retail price paid by the consumer and further fueling the overall perception of rising prices. It’s time to review and reset the promotion plans, starting with a clean slate and in conjunction with the daily price reset. By leveraging advanced analytics, pricing and promotion plans can be designed and optimized in tandem.

Identify margin improvement opportunities: The holistic and rigorous understanding of consumer demand and pricing drivers inherent in pricing optimization analysis often highlights product gaps that can be filled with margin-enhancing innovations in the medium to long term. . With this information, brands could source local products to create differentiated assortments while shortening the supply chain or bundle or unbundle existing products to create new value propositions or new prices, for example. A robust innovation pipeline not only responds to emerging consumer needs and margin pressures, but also demonstrates the investment in category growth for retailers and shareholders.

Brands and retailers need to start making better use of the data at their disposal to more easily meet the challenges of today and those to come. If so, prices can be scaled significantly in a way that engages consumers, while safely recovering margins to maintain and grow healthy and successful businesses.

Are Traasdahl is co-founder and CEO of Crisp, an open data platform that connects information and businesses across the food industry supply chain.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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