This is Part 3 of a series offering the following three tenants to avoid experiencing the Artificial Intelligence (AI) Hype Cycle:

1. Have a clear, intentional focus on the business problem you want to solve using AI (not a solution looking for a problem)
2. Create a foundation of repeatable data integrity to fuel your AI solution (garbage in / garbage out)
3. Manage the adoption of AI/ML solutions to provide rapid, repeatable and actionable results (not boiling the ocean)

Capital and human resources investments in pursuit of AI solution can be significant. Selecting the right AI approach can be a daunting task. It is essential that guidelines are set for AI adoption journeys. The following three basic considerations can help guide companies manage the adoption of AI/ML solutions to provide rapid, repeatable and actionable results:

• Rapid Results – rapidly solving a critical business problem builds confidence and momentum in adopting AI solutions. Organizational disillusionment and reduced future investments arise when measurable results require extended deadlines.
• Repeatable Results – One time “project” approaches are difficult to justify. Starting with a well defined Pilot for a repeatable solution can significantly increase internal buy-in by demonstrating significant measurable value.
• Actionable Results – results have to be accurate, trusted and specific in order for the organization to take action based on the results. Otherwise, adoption of the solution will meet resistance and likely fail.

The following table is an example of actionable results from a rapid and repeatable solution. The table pinpoints the top 5 profit enhancement opportunities by specific SKU and channel.

The significant promise of the potential value of AI solutions is clear. The path for adoption that avoids the typical “Hype Cycle” should start with:

1. A clear focus on the problem to be solved
2. Investment in data integrity to drive the solution and
3. Requiring strong, repeatable financial returns

Competitive Insights is an industry recognized leader in providing trusted AI solutions. Solutions that offer visibility on cost and profit performance specific to products, customers, channels, inventory, pricing and the impact of tariff strategies.

This visibility provides fact-based insights on how you can mitigate costs and identify the best options to protect margins and profitable performance.

We would love to hear your thoughts and comments. Please feel free to reach me directly at rsharpe@ci-advantage.com or visit our website at www.ci-advantage.com.

All the best,

Richard Sharpe

CEO – Competitive Insights

Historically, companies have made the critical mistake of using customer price increases to offset the costs of tariffs. With the tariff increases being designed by the new Administration, it is important to diversify tariff actions based on accurate, specific and actionable insights on each customer’s and product’s profit contribution. Those insights can be gained quickly to successfully continue to protect and grow profits.

The impact of global trade policies is a key element in establishing corporate strategies. It is important to recognize there are both short-term (weeks) and long-term (years) considerations in protecting profitability from tariff increases.

Protectionism versus free-trade policies have long been a part of political landscapes. I am not advocating the pros or cons of the utilization of tariffs. However, the new administration’s position on levying new tariffs will significantly impact revenue growth and potential earnings for many companies. In response to tariff increases, companies typically perform the following:

Long-Term Actions: determining the end-to-end implications of tariff increases on suppliers, manufacturers and distributors. Then, this information is used to develop multi-faceted tariff mitigation strategies such as the following example by Williams-Sonoma.

Short-Term Actions: making the critical mistake of reacting using a “one size fits all” strategy of price increases across their customer base. This type of action does not provide sustainable performance in maintaining or growing margin contributions.

Short and long-term tariff strategies can be far more effective knowing the specific profit contributions of every customer and product. This knowledge provides for diversified strategies based on high, marginal and unprofitable performance. In addition, these actionable insights can be applied in a matter of weeks as the political landscape shifts and turns.

Based on years of Competitive Insights client findings, customers can be grouped into the following three performance segments:

• The very small number of customers that provide 95% of the profit (Critical)
• The majority of customers that provide only 5% of the profit (Marginal)
• The customers that are totally unprofitable (Unprofitable)

Tariff strategies can then be based on informed actions for each performance segment:

• For Critical customers, some price increases may be needed, depending on the product mix purchased. The key is to ensure tariff related strategies prioritize keeping a strong and robust business relationship.
• For Marginal customers, it is imperative to understand what is driving their performance (sales volume, pricing, discounts, etc.). This root cause analysis can then be factored into tariff mitigation strategies for each customer.
• Unprofitable customers are only going to be more unprofitable if nothing is done. They should be carefully examined to understand why they are not generating net profitable performance. Corrective actions need to also include the additional negative impact of new tariffs.

Formulating profitable tariff strategies must be based on a specific understanding of profit contributions by customer and product.

Companies must act now to gain an accurate, specific and actionable understanding of each customer’s performance to successfully protect profits.

Competitive Insight’s AI solutions can create accurate visibility to your current customers and portfolio profitability in weeks. This visibility provides fact-based insights on how to best mitigate tariff increases to protect margins and profitable performance.

We would love to hear your thoughts and comments. Please feel free to reach me directly at rsharpe@ci-advantage.com or visit our website at www.ci-advantage.com.

All the best,

Richard Sharpe

CEO – Competitive Insights

With growing inflationary pressures, companies are pursuing aggressive strategies to reduce costs and operating complexity while still delivering expected profit contributions and shareholder value.

One prime area of focus is Portfolio Management.

Progressive companies are taking a proactive approach to reducing cost and operational complexity by performing a rigorous review of their product portfolio:

• Black and Decker
• Big Lots
• Osprey – Hydroflask

The Executive Vice President for a U.S. based company was dealing with significant cost and complexity pressures. His solution was to focus on the impact of SKU proliferation; "can we measure the specific cost and profit performance at the SKU, Customer, Channel and Region levels to reprioritize resources?”

Working with Competitive Insights, his organization discovered:

• Only 3% of their entire Customer base was contributing 80% of their profit
• 45% of their operating costs were being spent on servicing unprofitable customers and products
• Their 11th largest Customer, measured by Revenue contributions, was totally unprofitable

Having accurate, specific and trusted Cost and Profit performance insights produces actionable strategies that have extremely positive results.

Please comment on this posting or email me at rsharpe@ci-advantage.com

All the best,

Richard Sharpe

CEO – Competitive Insights

Companies are pursuing aggressive strategies to reduce costs and operating complexity while still delivering expected profit contributions and shareholder value. Using price increases, package down-sizing and re-negotiating supplier agreements can have damaging, long-term impact on customer and supplier relations.

In contrast, some progressive companies are taking a more proactive approach to reduce cost and operational complexity by doing a rigorous review of their product portfolio. (Osprey – Hydroflask: https://www.supplychaindive.com/news/osprey-hydroflask-helen-of-troy-supply-chain-overhaul/649176/ )

Another case in point is for a well-known global company that continued to increase the size of its Product Portfolio sold through three different Channels. The global Head of the Supply Chain knew that this was adding operational complexity and costs. He also knew that the answer to solving this problem was to gain accurate, specific and repeatable cost and profit performance for every SKU in their portfolio.

As with most companies, this company had a host of data sources that were siloed and difficult to use. Having previous experience with these issues, he charged his organization to find a solution that was scalable and that would provide a significant ROI every month. A solution was selected and found the following results:

As you can see, there were 37,825 unprofitable products adding $608 million in operating costs and draining $146 million from the profitable performance of the company.

Inflationary pressures are a significant concern for all companies. Understanding the ROI on where a company’s resources are being applied is critical as it relates to the actual costs being applied to servicing Customers, Channels and Regions and their Product orders. Having accurate, specific and repeatable insights to Cost and Profit performance produces actionable strategies that have extremely positive results.

Please comment on this posting or email me at rsharpe@ci-advantage.com

All the best,

Richard Sharpe

CEO – Competitive Insights