Title: Harnessing AI to Conquer Price Volatility in Retail and CPG Industries
Title: Harnessing AI to Conquer Price Volatility in Retail and CPG Industries
In the ever-changing landscape of commodity prices, retailers and consumer packaged goods (CPG) companies are under immense pressure to keep their profits up. This is especially true in the face of rising costs, such as the soaring price of cocoa, and an increasingly price-conscious consumer base. To tackle these challenges, these businesses must harness advanced technology and data-driven strategies.
The secret to success lies in utilizing technology to understand core customers, implement dynamic pricing strategies, optimize product offerings, and enhance supply chain agility.
Dynamic pricing, which adjusts prices based on market conditions and demand, helps businesses stay competitive while managing pressure on margins. With the aid of AI, companies can swiftly respond to shifting market trends and provide ongoing value to customers.
Three strategies enable retailers and CPG companies to stay nimble and react quicker than competitors to market shifts:
- Leveraging AI in both Pricing And Promotions: To cope with commodity price volatility, businesses need a real-time, data-driven approach to pricing and promotions. AI-driven optimization allows companies to quickly adjust prices in line with market conditions, competitor pricing, and consumer demand. AI-powered promotions planning can also predict the effectiveness of various strategies, ensuring profitability and sales growth.
- Optimizing Margins Through Portfolio Management: In a volatile market, optimizing product portfolios is essential to maintaining healthy margins. By leveraging AI and predictive analytics, retailers can streamline offerings, remove low-demand items, and focus on high-margin and private-label products, offering better control over pricing and costs.
- Fostering Supply Chain Agility: To keep pace in a constantly changing market, businesses must prioritize fast and responsive supply chain agility. AI and digital twins are empowering companies to act faster, enabling them to simulate and optimize their supply chains in response to cost fluctuations and consumer demand.
Integrating these strategies allows retailers and CPG companies to effectively navigate commodity price fluctuations, maintain profitability, and stay competitive in a price-conscious market. Addressing challenges, such as data quality, data security, infrastructure readiness, skill gaps, and change management, will help businesses capitalize on AI and advanced technologies.
Mikko Karkkainen, an industry expert in retail and consumer packaged goods (CPG), often emphasizes the importance of incorporating these strategies in the face of commodity price volatility. Following Mikko's insights, CPG companies can heavily benefit from his expertise in leveraging AI in both pricing and promotions, optimizing product portfolios via portfolio management, and fostering supply chain agility.