UK business profit margins hit hard as pricing strategies struggle to keep pace with supply chain disruption, study shows

A recent study conducted by Forrester Consulting on behalf of intelligent pricing platform, Flintfox International reveals that UK organisations will lose out on £451,000 every year in lost productivity, as a result of supply chain issues.

The study has found that organisations with outdated practices around pricing face will struggle to navigate the complexities of unpredictable supply chains. 2022 will see business model transformation pushed up the boardroom agenda as global change becomes increasingly unpredictable, with half (50%) of UK businesses claiming that poor data quality and capture is hampering the ability to keep on top of market fluctuations.

Profit margins scrutinised amid slow supply chain recovery

As the UK battles ongoing supply chain logjams caused by Covid-19, complexities arising from the stop-start nature of demand for goods, and significant changes in UK/EU trading, the research has highlighted the challenges facing retail, manufacturing and consumers goods industries. Hit severely by a slow supply chain recovery, they are undergoing a period of transition where profit margins have come under intense pressure. 

Pricing strategies forced to undergo transformation

Due to Covid-19, 55% of UK firms renewed focus on creating a pricing strategy that maintained demand and managed margins. 66% want their pricing initiatives to help them stay ahead of complex pricing changes at all stages of the supply chain.

However, 92% of these businesses report that Covid and Brexit has been having a critical impact on the ability to manage pricing across their product range, with 32% stating they are unable to keep up with the scale of real-time price fluctuations occurring in the market.

This is having a significant knock-on effect; with UK businesses losing on average £451,000 a year in lost profitability due to their inability to respond quickly enough to market forces.

Margin management seen as a key growth driver

Existing business models are preventing businesses from being able to manage the pace of change, with 34% still relying on manual processes to manage price fluctuations.

The research indicates that a shift to real-time, automated management of pricing, will be a fundamental business priority to manage the impact of global disruption in the year ahead, with almost one in five (18%) UK businesses set to invest in intelligent pricing technology in 2022.

In fact, the UK has potentially the most to gain from intelligent pricing. 34% of UK businesses approach pricing on an ad-hoc, case-by-case and manual basis – the highest across all markets surveyed (average globally is 26%).

John Moss, CEO, Flintfox, commented: “After the continued uncertainty of the pandemic, margins have never mattered more.  As inflation and supply chain issues continue to wreak havoc, it’s becoming increasingly critical for businesses to be able to respond rapidly to market fluctuations. Moving to an intelligent pricing model will enable businesses to better handle operational complexities and future-proof their businesses from harmful market events.