Vendor pricing updates are a critical function for B2B distributors, yet managing frequent changes from suppliers is a complex challenge full of risk. The pricing update process—which begins with receiving rate adjustments from vendors and ends with updated costs reflected across customer and financial systems—is seemingly straightforward, yet it often doesn't flow as well as it should.
Key Takeaways:
- Vendor pricing update issues often stem from a breakdown in processes that fail to accurately reflect new costs across all systems
- Resulting challenges include strained supplier and customer relationships, synchronization problems with IT systems, incorrect cost data, and eroded margins
- High-performing firms excel in pricing process consistency and technology-driven integration
In this blog, learn the business impacts of inefficient vendor pricing update processes on strained relations, revenue leakage, and market competitiveness. We’ll also explore how modern solutions centered around automation, analytics, and system integration drastically reduce the margins and credibility distributors lose to outdated, manual update mechanisms. Just as digital transformation has streamlined invoicing, technology promises to turn volatile vendor pricing into a strategic advantage rather than constant disruption.
An Introduction to Vendor Pricing Updates
Vendor pricing updates are the changes B2B distributors receive from suppliers and manufacturers to the wholesale rates of goods. Distributors must actively maintain current pricing within their systems in order to preserve margins and provide customers with up-to-date rates.
However, suppliers are adjusting their prices more often than ever before to keep up with market volatility.
Without the proper mechanisms, vendor pricing updates rarely transmit smoothly through distributor systems out to customer-facing teams. Gaps create opportunities for error: outdated pricing in distributor ERPs means business buyers may receive incorrect quotes or be invoiced improperly. When rates aren't kept current across systems and departments, orders get fulfilled at costs misaligned with actual pricing.
The impacts quickly snowball without efficient and automated ways to ingest frequent vendor price changes. In today's high-inflation economy, having real-time market rates is imperative. Distributors using manual updating processes often struggle. But for companies taking a data-driven approach, vendor pricing updates represent a chance to deepen customer relationships in periods of turbulence - not an operational burden.
Common Vendor Pricing Update Challenges
There are lots of separate complications that go into vendor pricing struggles, but at its simplest level most challenges are related to a breakdown in process. Most commonly, the new pricing does not make it into the back-end systems used for e-commerce, Point of Sale (POS), etc.
That means when sales representatives are giving quotes, they may be using outdated price information. In those cases, they’ll need to call their customer and explain that the pricing they previously received was wrong. You can imagine no customer wants to receive that call and no sales person wants to make it.
From there, they have the option of adjusting the quote to reflect current pricing, or eating the difference in cost - neither of which is great for the long-term customer relationship, or the organization’s bottom line. When there are breakdowns in the overall process, here are some of the specific outcomes you can expect:
1.) Inaccurate Costs in the System
Vendor pricing updates may involve changes in product costs, including raw materials, transportation, and overhead expenses. If these updates are not accurately reflected in the organization's systems, it can lead to incorrect pricing, profit margin erosion, and financial discrepancies.
To overcome this challenge, businesses should implement effective cost tracking mechanisms and ensure that other departments, such as finance and procurement, have access to the most relevant cost data. Consistent audits and reconciliation processes should be in place to identify and address any discrepancies promptly.
2.) Strained Supplier Relationships
Many organizations struggle with communicating new vendor pricing, which can strain supplier relationships and lengthen the sales cycle. Depending how quickly you receive cost updates from your own suppliers, it can be difficult to create the right messaging and communication to your own customers about why prices are going up.
If your company doesn’t have clear insight into why costs are changing and by what measure, that makes it difficult to have price effectiveness with your own customers - which will erode how you feel about suppliers over time. In turn, suppliers may feel undervalued and the relationship may experience breakdowns in communication.
It’s crucial to have full transparency into the pricing process and timelines used by your suppliers, including regular meetings, negotiation sessions, and clear expectations of the rationale behind price adjustments. Clear communication is essential for fostering understanding and maintaining healthy supply-side relationships.
3.) Tense Customer Relationships
When vendor pricing updates result in increased costs for products or services, customers are likely to ultimately feel the impact directly. This can lead to a whole host of unfortunate outcomes, including dissatisfaction, decreased loyalty, and even potential loss of business. At the very least, the customer is likely to be agitated and question your professionalism and trustworthiness moving forward.
To resolve this challenge, organizations should proactively communicate pricing changes to customers, highlighting the value proposition and benefits that justify the adjustments. Offering alternative options, discounts, or loyalty programs can also help soften the impact and maintain positive customer relationships during this transition. Neither of those options are really possible, though, if you don’t have the correct systems and processes in place to make pricing adjustments uniform across systems, in a timely manner.
4.) IT Systems Synchronization Struggles
Vendor pricing updates require seamless integration with an organization's IT systems. However, updating prices across various platforms, including e-commerce websites, ERP systems, and Point of Sale (POS) systems, can be a complex and time-consuming task. Inadequate cohesion across platforms will result in discrepancies between pricing information, leading to confusion, errors, and potential revenue loss. These issues also tend to be time-consuming for IT staff and lead to other errors.
To avoid these costly issues, businesses should invest in robust and automated systems that can efficiently update prices across all relevant platforms in real-time. Regular data audits and testing should also be conducted to ensure the accuracy and integrity of pricing information. Don’t be afraid to consult with an expert who can guide you through choosing and implementing key processes and technologies. These platforms are the basis for a streamlined pricing update process, so getting them right is essential.
5.) Delayed Order Processing
In an already stressed supply chain, having pricing inaccuracies can lead to longer sales cycles and disruptions that frustrate customers and staff alike.
As an example, if a price increase is effective on November 1, and a purchase order comes in on November 10 based on the old pricing, a rep will need to call the customer and explain the price discrepancy before processing the order. That could take any number of days, not counting the potential negotiation that might ensue. There is likely to be some back and forth, which will delay the order even further. Now the customer is agitated that their order won’t be ready when they had originally hoped. Not only that, all of this time that a customer service or sales rep is working on this particular order is time that could be spent selling.
You want your staff engaging with customers to get new business, not to sort out logistics of an ongoing order process. The larger the deal size, the longer potential lags can be - and all the while you’re at the risk of losing both current and new business.
6.) No Real Transparency into Supplier Costs
Vendor pricing updates often rely on suppliers' cost structures, which may not always be transparent or readily available to the buyer. This lack of visibility can make it challenging for organizations to verify the accuracy of pricing adjustments and evaluate the competitiveness of their suppliers.
To address this challenge, businesses should establish strong supplier relationships based on transparency and open communication. Regularly reviewing and benchmarking supplier costs against market trends and industry standards can also provide valuable insights and ensure fair pricing for both parties.
The struggles don’t stop there. When customer service needs to call contacts to explain price changes, that can become draining and frustrating. They may lose deals or even accounts altogether, which ultimately impacts the money they earn. Over time, these frustrations build and morale and overall satisfaction can take a real hit. When salespeople are agitated by broken processes that make their job harder, it’s only a matter of time before leadership starts hearing grumbling, or worse, has to deal with eventual turnover.
Any Process Can be Optimized
Vendor pricing updates undoubtedly present a variety of headaches for organizations who sell products. Everything from supplier relationships and customer satisfaction to IT systems and overall cost management can be affected. It’s also important to consider the morale and satisfaction of your staff, who need to dig around for accurate pricing and have difficult conversations with customers about incorrect quotes.
By recognizing and addressing these challenges proactively, businesses can navigate the complexities associated with pricing updates and minimize their negative impact. Open communication, robust IT systems, accurate cost tracking, and transparent supplier relationships are key to successfully managing vendor pricing updates and maintaining healthy business operations.
We help leading B2B companies to improve supplier pricing and invoicing processes to strengthen visibility, cycle times, accuracy and their bottom line. We work with your current systems to identify the right processes and reduce wasteful ones, build secure and stable automated workflows, and bridge the gap between new and existing systems. If you have struggled with vendor pricing updates and you’re noticing a hit on your bottom line, reach out to our professionals. Set up a time to talk to our team and learn more about how you can work faster and scale pricing operations across your organization.
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