Economic disruption, triggered by a wave of tariffs on imports from China into the U.S. as well as the COVID-19 pandemic, have resulted in a scarcity of microchips for many high-tech manufacturers. In some cases, they have had to remove features from their products just to keep pace with demand.

In the midst of these crises, pricing has become a strategic lever that allows teams to become more proactive to changes in the market.

Revenue teams that continue to use rudimentary tools like spreadsheets to keep track of price lists are experiencing multiple issues, including many manual errors and an inability to understand how their prices are being executed in the market.

Now, in 2024, the advent of platforms that enable visibility are helping teams to understand what the prices of their products should be. But knowing what’s needed isn’t the same as being able to do it efficiently and at scale.

Dynamic pricing isn’t just about being able to make price adjustments quickly — it’s about understanding how the market is moving, and responding proactively.

Artificial intelligence, especially generative AI, is revolutionizing pricing strategies in supply chain and manufacturing. AI-powered pricing algorithms can analyze large amounts of data and help teams quickly identify patterns and trends, as well as generate forecasts on how demand volumes would be impacted by various pricing decisions — all without having to test them in the real world.

AI models can drive strategies to implement dynamic pricing by providing closer to real-time insights when market conditions change, including price adjustments from competitors, increases in key raw materials and components, and shifting trends in customer behavior. 

Scalability is the game-changer. It draws on the power of AI to identify key trends, allowing teams to be more strategic and test multiple scenarios and models in controlled environments prior to introducing them to the market.

Following are some suggestions for ensuring that your pricing strategy is the correct one.

Identify which market dynamics are most likely to impact your business. Do you have visibility of your supply chain, to know where you might be impacted by the next shortage of key components such as chips, or the introduction of new tariffs? Most companies learn this the hard way, and have had to absorb a lot of cost increases because they lacked the information to be able to react quickly to changing trends, let alone predict them.

Diversify suppliers for your most critical components and raw materials. Build a resilient supply chain by sourcing materials from multiple regions. Reducing exposure to supply chain disruptions prevents your pricing strategy from becoming a way to offset poor planning.

Invest in AI as a means of testing multiple scenarios with minimal risk. AI-powered pricing algorithms can help you to make data-driven pricing decisions. They bring scalability to your pricing analysis, and make it easier to forecast market trends before they hit the bottom line.

Ensuring optimal pricing in supply chain and manufacturing requires understanding the many ways that your operation can be affected by external and internal factors. A great way to ensure an effective pricing strategy is with the support of AI models for scalability, and dynamic pricing driven by processes and tools that enable visibility of what’s actually happening in the market. As global supply chains continue to evolve, staying agile and informed will be crucial to maintaining a competitive edge.

Jose Paez is director of solution strategy for Pricefx.