Specialty Chemicals Provider
Optimized Tariff Management for Enhanced Profitability
Identified $10M (~2%) of incremental revenue opportunity to protect from unnecessary margin erosion
Understanding Tariff Exposure and Optimizing Tariff Recapture Plan
A specialty chemicals distributor optimized their existing tariff recapture workstream to identify $10M of incremental revenue opportunity.
This specialty chemicals distributor faced significant margin erosion due to limited visibility to real-time costs, ongoing ERP transformation challenges, and decentralized pricing autonomy. By thoroughly assessing the tariff recapture methodology, we uncovered $7M in unrecognized tariff exposure and identified $3M in low-margin pricing outliers for correction. Implementing a dynamic model to strategically offset tariffs while preserving margin neutrality allowed the client to optimize pricing strategies, resulting in a substantial boost to profitability.
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Situation
Facing Margin Erosion Amid Cost Volatility
ERP transformation, decentralized pricing decisions, and commodity-driven fluctuations created challenges in maintaining margin discipline and updating prices efficiently - despite healthy underlying spreads
- Limited visibility into real-time costs led to ongoing margin erosion
- Historical acquisitions and subsequent ERP transformation made reporting challenging
- Sales reps had nearly full autonomy over pricing, relying on individual expertise
- Pricing for key products was heavily influenced by commodity index fluctuations
- Relatively healthy margin spread between customers and products with opportunity for improvement
- ERP constraints made price updates and performance tracking highly manual
Tariff Related Margin Expansion Opportunity
Identified opportunities to expand margin and reprice outliers
Approach
Unlocked Untapped Growth Through Strategic Tariff and Price Modeling
Refined tariff recapture methods, identified low-margin outliers, and implemented a dynamic model to neutralize tariff impact while preserving profitability
- Assessed and validated the business’s tariff recapture methodology for effectiveness, identifying an additional $7M of tariff exposure that was not identified and included in the current execution plan
- Completed additional modeling to identify an additional $3M of low-margin price outliers for the client to correct during the same repricing event
- Implemented a dynamic situational model to strategically offset tariffs
- Ensured all tariff-related pricing adjustments maintained margin rate neutrality
Situational Model Framework
A tailored framework designed to align pricing strategy with market dynamics, cost fluctuations, and customer segmentation - enabling smarter, faster pricing decisions
Combined historical pricing data, key customer attributes, and real-time market dynamics to determine the optimal tariff strategy and level of pricing aggressiveness
Impact
Uncovered Incremental Revenue
Strategic tariff recapture workstream and dynamic situational model to identify incremental revenue
$10M
Incremental revenue opportunity identified
Protected client from unnecessary margin erosion
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