In the fast-paced food distribution industry, where margins are razor-thin and pricing structures can be complex, having a robust ERP solution is crucial. Rockton Pricing Management (RPM) is a versatile pricing tool that integrates seamlessly with Acumatica, empowering food distributors to navigate challenges effectively. In this blog, we’ll explore best practices, innovative uses of RPM within the Acumatica ecosystem, and broader industry trends that shape the food distribution landscape.
Understanding the Challenge: Tight Margins and Complex Pricing
Food distribution companies have a keen awareness of their operating expenses and desired profit margins. In a highly competitive market, even minor pricing errors can lead to significant profitability losses. Acumatica users in this sector benefit from RPM by implementing advanced pricing strategies that help maintain their profitability amidst fluctuating costs.
Best Practice: Leveraging Range Costing Methodology for Price Stability
One innovative approach adopted by an Acumatica-integrated food distributor involves utilizing range costing methodology. Instead of relying solely on current costs, this distributor averages costs over a two-month period, including both existing stock and incoming inventory. This method not only provides a more stable pricing framework but also allows companies to anticipate cost trends, enabling them to remain competitive even when supply costs fluctuate.
Case Study: Percent Margin vs. Percent Markup
A critical distinction in the food distribution space is the choice between using percent margin versus percent markup for pricing decisions. Many distributors erroneously apply a markup method, which can lead to inaccurate margins. For instance, a distributor may set a price of $1.20 for a $1.00 item, resulting in only a 16.7% margin. By utilizing RPM and the correct formula for percent margin—Cost / (1 – Margin Percent)—the distributor can more accurately achieve their desired pricing, setting it at $1.25 for a 20% margin. This shift not only enhances profitability but also strengthens financial forecasting.
Integrating Rebates, Commissions, and Payment Terms
Effective pricing in food distribution also requires the integration of rebates, commissions, and payment terms. Our featured client successfully incorporates broker commissions and adjusts for early payment discounts, such as a 2% net 10. By ensuring all these factors are calculated using the percent margin approach within RPM, food distributors can achieve higher pricing accuracy and improve their overall financial health.
Addressing Complex Freight Calculations
Freight costs represent another significant challenge in food distribution. Our client employs RPM’s complex freight rules to facilitate fair pricing based on shipment weight, ensuring they remain competitive as order sizes increase. This dynamic pricing approach allows for strategic adjustments that enhance customer satisfaction while protecting profit margins.
How RPM Automates Pricing for Food Distributors
Rockton Pricing Management automates the pricing process for food distributors using Acumatica by recalculating selling prices based on updated item costs, predefined margin targets, and freight rules. This automation not only ensures consistent profitability but also frees up valuable time for financial teams to focus on strategic decision-making.
Boosting Profitability in Food Distribution with RPM and Acumatica
By incorporating operating costs, rebates, and freight calculations into their pricing strategies, food distributors using RPM can accurately predict their core percent margin, resulting in a stable bottom line. In a volatile market, an adaptable pricing solution like Rockton Pricing Management, integrated with Acumatica, is essential for companies seeking to maintain a competitive edge.
To learn more about how Rockton Pricing Management can support your food distribution business, visit www.rocktonsoftware.com/price-management-software
