A leading player in the e retail industry wanted to build an price forecasting model to lower inventory costs, improve cash turnover cycles, and respond quickly to pricing trends. The client also wanted to enhance their category expertise and intelligence across all critical areas of the supply network. To do so, the e retail client approached SpendEdge to leverage commodity price forecasting solutions and devise an effective model to forecast future pricing trends. A detailed quantitative analysis of various supply chain categories was carried out to build world-class procurement solutions.
About the Client:
A leading player in the e retail industry.
The e retail client was facing several challenges in making optimal pricing decisions, which varied from comprehensive data on price trends to highly granular market-specific information.
How did SpendEdge Help the Client?
- Step 1: Data gathering and refining
The first step revolved around the development of a key list of commodities important to the particular industry and collection of data based on their pricing history. Also, external data such as transportation indices and economic indicators such as CPI, PPI, BLS surveys play a major role in influencing the commodity price.
- Step 2: Development and validation of the price forecasting model
The second step revolved around the development of an appropriate model to predict the commodity costs over a definite time window. Also, the validation of the developed price forecasting model is essential to enhance price forecasting strategies, as it can help reduce the time allocated for information gathering and enable e retail companies to focus on devising effective strategies.
- Step 3: Development of a precise price forecasting dashboard
To devise an effective price forecasting dashboard, it is essential to consider what-if scenarios for predicting commodity cost by manipulating the key cost drivers. The developed price forecasting model enabled the client to improve business productivity by leveraging the use of valid predictions to enhance pricing decisions.
Key questions answered in this commodity price forecasting engagement include:
Benefits of the Engagement:
The commodity price forecasting experts at SpendEdge helped the e retail industry client to enhance their procurement efficiency by devising an effective price forecasting model. Commodity price forecasting also enabled the client to gain detailed insights into the different categories within the supply network.
Why incorporate price forecasting solutions in the retail industry?
“Price forecasting deals with the collection and analyses of the demand and supply information in real-time. It offers comprehensive insights into pricing trends and also offers a detailed prediction of the short and long-term prices of various commodities.”
Globally, new imperatives have emerged out of complex market landscapes besides cost savings; thereby, compelling e retail companies to view the role of procurement through the prism of innovation, risk, flexibility, cost, and speed. Also, since procurement deals with prices for diverse categories, it is, therefore, essential for an organization to devise robust pricing strategies. Several firms still rely on industry experts to understand the market trends and cost drivers of their forecasted prices, whereas, a few prefer mathematical models to forecast future prices.
Implementing price forecasting solutions helps e retail professionals to focus on pricing strategies to drive organizational value. This helps them to emphasize on adding value to procurement rather than merely cutting procurement costs.
Effective pricing strategies also help e retail firms to develop procurement intelligence capabilities, which proves to be challenging even for the most resourceful organizations. Therefore, it is essential for businesses to develop a strong foundation in price forecasting, as it helps deliver breakthrough value and elevates the role of procurement by offering detailed insights into the administrative spend data.
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