Tackling Raw Material Market Volatility with an AI-Driven Strategy sparks Company-Wide Transformation

Driven by global complexities, companies are increasingly confronted with significant challenges due to fluctuating raw material costs. These variations are fueled by ongoing geopolitical tensions, economic uncertainties, and evolving market dynamics, highlighting the critical need for robust cost-tracking mechanisms and real-time data accessibility from production to sales.

In response to these pressures, companies require agile strategies and strategic foresight to maintain competitive advantage and ensure operational efficiency.

Challenge

It was the exact challenge a multi-national food company faced in 2022, following the global disruptions caused by COVID-19 and the war in Ukraine, . The volatility in raw material costs severely impacted the company's financial planning and operational stability.

Fluctuating costs made pricing and budgeting unpredictable, directly affecting the company’s ability to manage margins and forecast financial outcomes. This increased market uncertainty compelled our client to accelerate decision-making processes to sustain operations and pursue its ambitious goals for sustainable growth. To effectively navigate these challenges, they urgently required rapid access to detailed, real-time data on raw material cost inflation to make informed, strategic pricing decisions.

Additionally, there was a pressing need to align these efforts with environmental, social, and governance (ESG) principles to meet regulatory requirements and consumer expectations for sustainable practices.

Compounding these difficulties was the scattered and poorly mapped data across the organization, with 90% of information being managed through inefficient and error-prone Excel files. This system led to significant delays, increased risks of errors, and redundant tasks—issues that became increasingly problematic as the need for frequent updates grew with the continuing volatility in raw material prices.

Our client came to Pivot&Co to help them strengthen their strategic positioning, turning these complexities into opportunities for growth, enhanced operational efficiency, and greater sustainability.

Solution

In response to the escalating volatility of raw material costs and its ripple effects across the global market, Pivot & Co developed the "Raw Mat Cockpit”. This sophisticated, AI-driven platform was designed to empower the sales teams by providing critical data and analytical tools necessary for effective price negotiation and strategic decision-making.

Key Capabilities and Benefits:

Globally:

Data Access and Visualization: Sales teams can access a comprehensive dashboard displaying key performance indicators from 2018 to present, helping them understand long-term trends and immediate needs.
Cost Analysis Breakdown: The platform details raw material cost impacts per country and per brand, allowing for tailored approaches to each market and brand strategy.
Budget Variance Tracking: Tracks raw material cost variations against budgeted costs, providing a clear view of financial performance and deviations.
Inflation Analysis: Calculates the inflation to pass on per brand or SKU, guiding international pricing strategies to maintain profitability.

Locally:

Detailed Inflation Data: Provides specific inflation figures to be passed on per brand and SKU, equipping local teams with the data needed to adjust prices accurately and responsively.
Empowerment of Local Markets: Enables local markets to strategically determine where inflation costs should be absorbed—whether at the brand level or SKU level—enhancing local decision-making autonomy.

Results

The deployment of the “Raw Mat Cockpit” has not only optimized our client's operational processes but also sparked significant transformation, overhauling the way the organization handles market volatility and decision-making, as highlighted below:

Negotiating Price Increases: The "Raw Mat Cockpit" provides the sales teams with strong, data-backed arguments for price adjustments during negotiations. This ensures that pricing discussions are based on solid market data, increasing confidence and credibility in these interactions.

Support for Sales Actions: The platform boosts the sales team's effectiveness by providing real-time, detailed market insights. This enables them to quickly adapt to market shifts, push for necessary price changes, and achieve sales targets, improving both individual and departmental performance.

Empowering Stakeholders: The platform aligns raw material costs with broader market and sales strategies, enhancing strategic planning and decision-making across the organization. It supports not only sales but also finance and operations, fostering a unified approach to market challenges. This coordination enhances the company's agility and responsiveness to market changes.