The right net means the right price: the challenge for enterprise scale ag

For enterprise-level distributors and retailers, managing product net costs and setting price is what drives your business performance. It’s how you expand your profit margins, grow your company, and stand out with customers in an increasingly competitive space.

So why does this process have to be so… messy? And how can leading companies improve their processes to drive better results?

The standard for costing/pricing in the Ag input supply chain industry is marked by confusion and complexity — up and down the organizational chain.

Costing: At head office, commercial leaders often lack full visibility of rebate earnings, largely due to local incentive offers from manufacturers (or sometimes distributors). So understanding the appropriate amount you’ll be owed can be difficult, and particularly how you estimate the combined impact of centrally-negotiated incentives vs. regional/local ones. But enterprises often lack the data that clearly show the relationship between selling activity and net costs — which makes margin improvement way harder.

Pricing: Inside regional branches, your team is in the thick of pricing to growers or independent retailers. But they don’t always fully understand your cost position because they don’t have full visibility over end-to-end net costs.  (This could be “by design” or because Excel and sharepoint are the primary internal costing and pricing tool.) They’re often working off old net pricing, simply because supplier price changes and incentives are changing more frequently than at any other time in history. (No pressure!) Your team needs to better manage pricing decisions and offers in real time — but often lack access to real-time data.

The 4 culprits of all this confusion

So, whether you’re at a corporate office or you’re working from within a region or branch, it’s worth understanding howall this confusion originates.

So let’s dig into the main causes of this inefficiency — and how to overcome them.

1. Content overload and complexity

How often have you seen a manufacturer send one batch of information to one part of your organization… then another batch to a different department? And then the next week, there are four more batches. It’s a scramble just for everyone to get on the same page.

In today’s industry, it’s common for manufacturers to constantly push ever-more-granular program information up and down the line of an enterprise distributor/retailers’s organization. From corporate to regional field offices, everyone has differing levels of visibility and understanding of that info based on their specific job.  Your organizational hierarchy and business territories don’t match with with a manufacturer’s territories.  (If you live in the “boot heel” of Missouri, you know what we mean.)

Suddenly there’s a “who’s on first?” situation where no one is really sure who has the “right” info.

And accurately pricing and selling based on product nets in all that confusion? Forget about it.

2. The performance feedback loop

Too often, choosing which in-season levers to pull to drive higher margins can feel like being on a circular highway — and you’re not sure which exit to take.

Your sales team’s performance relative to incentive programs changes your effective net cost position. If you’re using a cost-plus pricing strategy, this will shift your selling prices themselves, which impacts your perceived competitiveness in the market, driving the products your team supports. That feedback loop again impacts your net cost position. But not in a clear, easily measured way. And sometimes, not even in your favor.

Without visibility over changing costs (which, again, are happening faster than ever), it’s harder to figure out the right,data-backed answer of which products to support in the market, and where to bring in new stock (particularly in today’s over-supplied market).

3. Too much reliance on Excel

For all the different numbers, processes, and new info swirling around overhead, your team will most likely be managing all this complexity in Excel.  But in order to maintain information and data security, commercial managers need to create multiple file versions, hidden columns, “management views”, “regional views” etc.

To take the next step forward, enterprise-scale distributors and retailers have to replace those Excel spreadsheets with more powerful, efficient tools. Relying primarily on Excel can create unnecessary internalconfusion, harm your information security, make auditing changes more difficult, and more.

(Read more about how evolving past Excel can unleash the full potential of your agribusiness in our blog post.)

4. Competitive confusion

Let’s say you notice one of your competitors consistently selling at a specific price you think is below their cost. Are they doing this because they actually have a better cost position? Do they have a better deal with the manufacturer — and you need to renegotiate your deal?

Or, is this competitor just content with thinner margins? Are they selling below cost just to move product? Have they structured a market offer so this lower priced product simply serves as a loss leader?

Without true, accurate, up-to-date net cost information on hand and available to both head office and your regions, all you see is the end result (your competitor selling or not selling at specific price points). You don’t have visibility over their strategy for why.

And if you don’t understand how your competitors arrived at the prices they sold at, your own pricing strategy gets muddier — and more reactive.

So…. what’s the solution to this tangled web?

And how do you restructure some of this confusion?

Enterprise-scale Agribusiness distributors and retailers  of the future need:

• Tools that give everyone the right visibility up and down the organization: Sales teams need accurate, real-time cost data so they can price appropriately. Head offices need visibility over end-to-end rebate earnings so they can ensure proper supplier management. And business leaders need to know who has what information, how their teams arrived at those data points, and how accurate it is.

• Net sheets that reflect healthy, accurate data: If a net sheet isn’t set up well (including inaccurate or old data), it sets everyone up for failure. Without accurate nets, you can’t make optimal purchase decisions, growers might not always get fair pricing, and margins will suffer. (Side note: our benchmarks indicate that Excel-based net sheets have errors in 2 out 3 of the SKUs we audit).

• Information security: With all the flows of information happening, you need to ensure your organization’s data is protected and only available to the right individuals in your team. More real-time data is only helpful if that data is also secure.

• The ability to empower salespeople with accurate information — efficiently. It’s hard to increase margins (especially in 2023) if your sales team is working off weeks-old (or even day-old) pricing info. If this data is on an easy-to-reach dashboard or pushed to their mobile devices, salespeople can easily reach the most updated information possible.

A costing solution that meets the moment

Running a complex enterprise in the Ag input supply chain will always be multidimensional. But confusion doesn’t have to be the common denominator amongst all those layers. 

The Smartwyre Costing Solution gives enterprise-scale distributors and retailers:

• Real-time cost data

• Automatically calculated nets at a company, region or branch level

• Easy comparison of substitute products

• Simple, clear digital access

Linking seamlessly to the Costing solution, Smartwyre Selling enables a sales team in hundreds of branches with:

• Real-time, role-based, and account-based pricing information

• Automatically calculated nets at a region or branch level

• An intuitive quoting, booking and rebate-offer tool for reps and branch-managers

• Mobile-access in an easy-to-use app

With powerful, accurate, timely information at your fingertips, you can finally enable your head-office team AND your regional leadership to make decisions based on data — not guesswork.

If you’re interested in how Smartwyre can power the next level of your business, reach out to the Smartwyre team today.