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It’s time to talk about your pricing strategy

It’s time to talk about your pricing strategy

Supply chain managers face tremendous pressures these days. The cost of shipping a container of goods has nearly tripled during the pandemic, rising by 80% between November and March, while spot rates across the board have been steadily increasing almost daily. At the same time, demand for rapid service contends with driver shortages and tight capacity, making it all the more difficult to establish a pricing strategy that can meet expectations. 

Yet despite their best efforts, many providers miss the mark. Whether they pay too much, go in too low, miss out on rate drops, or end up taking too long to submit, an effective pricing strategy requires a complex balance of constantly shifting variables to work effectively. 

If this has happened to you, there’s a good chance you may simply have outgrown the tools used to establish your strategy.

There are a wide range of methods that most supply chain managers utilize in establishing their pricing strategy — some more effective than others. Below we’ll examine two of the most common methods, and outline the signs that it might be time to look beyond them.

Spreadsheet software

As the go-to application for many supply chain managers, spreadsheet software like Excel and Google Sheets is a common sight in supply chain and logistics management departments at companies both large and small. And it’s not hard to understand why. It’s low cost, easy to use, versatile, and universally available, and can accomplish quite a bit.

How do you know if it’s time to move on? 

Your customer list is growing, and it’s becoming difficult to manage change

As volatility increases and your customer list grows, it becomes increasingly vital to be able to track key data in real time in order to maintain that proactive strategy. 

When faced with uncertainties, you are forced to guess

With the siloed access to data provided by a spreadsheet, supply chain managers are left making assumptions on market trends with the limited evidence available.

You’ve encountered errors in your models

Various studies over the years have shown that nearly 90% of all spreadsheets contain errors. Large or small, these can compound into significant losses over time.

The auction strategy

More sophisticated than spreadsheets, we see many shippers adopting the auction approach in their pricing strategy. In this strategy, the shipping manager doesn’t need to set their own prices — the market does it for them. By putting the question of price to the carriers of their choice, the shipper is able to simply examine the prices provided and select the best fit.

How do you know it’s time to move on?

You are unable to confidently determine what prices are competitive

Without access to prices from those outside of your selected carriers, it can be difficult to determine whether prices provided are competitive with the general market. 

Bringing new carriers on board has been a challenge

No matter how thorough your research, without insights into pricing history, there is little to no way to gauge how a new carrier will react to shifts in the market.

You have been unable to push for lower prices when they were called for

Due to the inherently passive nature of an auction strategy, it doesn’t allow for much nuance in pricing, and you typically receive little to no guidance or interaction with the requesting shipper.

How can you improve?

The methods outlined above certainly have their time and place, but for companies that are beginning to encounter those red flags, it may be time to modernize your operations with a more advanced solution. 

With data-driven pricing intelligence tools, supply chain managers are provided with access to the information needed to develop a winning strategy by analyzing both internal company data and external market information to provide tailored, scenario specific guidance. 

Gain pricing confidence

Know you’re getting the best rates by comparing your internal data with similar shipments in the market so that you can place bids with confidence and gain an advantage in negotiations

Manage complex variables

Automatically receive guidance built directly into key points of your existing workflows in order to better manage complex variables, including specialized cargo types and shipping methods, 

Plan for the future

View forecasts showing both company-personalized and market rates for 14 days into the future to set accurate targets to scale decisively and quickly adapt to market fluctuations.

The world of the supply chain manager is complex, dynamic, and competitive. Weather, politics, consumer trends, and global events can, will, and have had significant effects on nearly every supply chain. But data-driven tools like Shipwell’s pricing intelligence capabilities can help to not only predict and prevent problems, but even turn them into business opportunities. 

What’s next?

Shipwell white paper image

Get a full view into the types of tools, models, and functionalities that are essential to an effective pricing strategy — and how to put them to work in yours. Download our latest white paper Gaining pricing confidence: How to leverage data in your strategy