How a distributor used AI-driven dynamic pricing for quick ROI
In this podcast, Turtle CTO and CISO David Magee explains why price optimization is so important to electrical distributors and how an Infor ERP 'widget' automates the task.
AI-driven dynamic pricing is an increasingly popular application -- and one that proves AI has undeniable advantages over humans in some critical tasks. In seconds, AI can analyze customer histories and external market data to identify profit-maximizing prices that won't drive away customers -- steps that can take people up to a half hour to complete. And it can do so without the biases that can prevent salespeople from seeing opportunities.
The experience of Turtle, one of the largest electrical distributors in the U.S., starkly illustrates the difference AI can make. After an unsuccessful effort to develop dynamic pricing in-house, Turtle worked with the data science team at Infor, its ERP vendor, to develop and deploy an AI pricing tool in 12 weeks. Gross margin saw a 1.3% net increase, and item pricing got 98% faster, according to Infor.
In this episode of Enterprise Apps Unpacked, Turtle CTO and CISO David Magee shares details of the case study, including the work that went into developing the AI-driven pricing tool as well as the biggest challenges and lessons learned.
Avoiding the race to the bottom
David Magee
A 102-year-old company led by women since the 1940s, Turtle sells mostly to large electrical contractors rather than consumers. It also helps manage projects like the central control system of the energy "microgrid" at the massive Hudson Yards development in New York City.
Magee explained that distributors can fall prey to a "race to the bottom" when they compete on price. Therefore, having a more sophisticated and timely analysis of factors that affect profit at a given price is crucial. Salespeople access the dynamic AI pricing "widget" in the order-entry screen in the ERP system, Infor CloudSuite Distribution.
"We try to put some more intelligence behind it so that we're pricing fairly based upon more than just traditional price to the customer," he said. A key data source is COMEX, the futures and options exchange for essential materials like steel, copper and petroleum. COMEX prices have a direct effect on Turtle's costs, including the holding costs in warehouses. "We start trying to bring in other factors so that we're making better informed decisions and providing appropriate pricing recommendations to our sales folks," Magee said.
Other topics discussed in the podcast include the following:
- Why optimizing prices is so important for large distributors.
- How the Infor agentic AI goes beyond advanced analytics.
- Turtle's plan to use Infor AI in inventory management.
David Essex is an industry editor who creates in-depth content on enterprise applications, emerging technology and market trends for several Informa TechTarget websites.
