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From Data To Dollars
by: Cara DeGraff | June 21, 2024

Elevate your pricing strategy with data-driven solutions for wholesale distributors

Data is the new currency, quickly becoming the defining factor for success in the evolving wholesale distribution landscape. Data can be bought and sold, and it can mean the difference between profit and loss. If you rate yourself an expert in data capabilities, you’re likely further ahead in every area of your wholesale business and are moving faster than your competition at growing your capabilities and maximizing revenue.

Data Driven Solutions Wholesale Distributors

Data dinosaur or dynamo?

I read a recent Modern Distribution Management (MDM) survey indicating that 70% of distributors plan to invest in improving their data capabilities in the next 3 years. If you’re not already on board, you’re falling behind. Fortunately, even the most data-deficient distributor can become a data-driven dynamo.

Companies have improved their data proficiency in finance over the years, but I believe that areas like vendor management and pricing are ripe for data-driven optimization. When working with vendors, the right tools to collect, capture and share data can be a differentiator. Sharing sales data across locations translates to better vendor deals and smarter inventory allocations.

Capturing sales and customer information on vendor products is invaluable. This data allows vendors to get sell-through information to manage channel inventory, analyze sales and target their indirect markets more efficiently. It also gives visibility to potential ship and debit or SPA claims, which vendors are often willing to pay for in the form of fees and incentives.

This data is critical for you and your suppliers. Data science and GenAI are only as good as the data they receive. The more high-quality data available for the models, the more accurate the decisions and recommendations will be. Comprehensive data on costs, prices, discounts and incentives yields a more holistic view of true pricing and profitability.

Focusing solely on the final sales price is like looking at the tip of the iceberg. I believe the real story lies beneath the surface. Having all the data needed to look holistically at the full Gross-to-Net waterfall allows you to decide on the right price and tailor your incentives to maximize profitability.

Tech tune-up

In this same MDM survey, technology wasn’t considered a top priority for most distributors, even though many respondents identified it as a significant challenge for the coming years. Regardless of company size, the right tech isn’t a luxury; it’s a necessity to collect and leverage data to optimize decision-making.

In my opinion, implementing technology to manage data follows a progression. The simplest level is reporting. The first step is extracting sales information from the ERP system. Even basic systems like data warehouses, PowerBI or Excel can help you extract and analyze sales data to understand your performance clearly.

The next step involves implementing solutions to automate ship and debit and SPA claims, manage vendor purchasing rebate programs, and track customer and sales incentives. Clean data translates to cleaner finances and an end to overpayments, missed vendor dollars and other costly errors.
The right solutions also help ensure all data is considered when determining the true cost and setting prices. Formulas to add all cost components, subtract all discounts and incentives, and multiply commodity and overhead factors will arrive at each vendor’s landed cost.

Visibility to this data and ancillary information — such as on-time delivery, shipment accuracy and inventory availability — will ensure correct purchasing supply decisions. Adding potential rebates and incentives based on purchases will provide the proper view and optimize purchasing.

The power of prediction

As you build a robust data history, you can leverage data science and GenAI to segment customers and recommend optimal pricing strategies. With predictive analytics, you can better anticipate market trends and customer needs, achieve more accurate demand forecasting and inventory management, and reduce stockouts and overstock situations.

Models can consider prices, discounts, rebates and other incentives to create a holistic approach to maximizing profitability and revenue. GenAI uses natural language processing to search for information and dynamically create and adjust new prices, promotions and incentives.

I can’t emphasize this point enough: Data shouldn’t be a black box. A good solution should empower your sales team, help them understand the logic behind suggested pricing and give them the flexibility to adjust based on customer relationships.

Data Driven Solutions Wholesale Distributors

Start small, think big

Data is crucial to your company’s profitability and empowers you to make strategic decisions about everything from inventory management and supplier negotiations to customer targeting. That said, I don’t believe it’s an all-or-nothing proposition. You must start by collecting data and then implement a solution to leverage it for pricing and incentives.

Finally, you can optimize your business with a solid data foundation and historical results. Your data is a treasure trove waiting to be explored. Dive in and discover your hidden profits.

Gain valuable insights on the importance of data-driven solutions for your wholesale distribution business.