Dynamic pricing: An option for cement logistics?

Press Review

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This article was published in the October issue of Global Cement Magazine in 2018.

Dynamic pricing is a strategy in which businesses set flexible prices for products and services based on current market demand. While common practice in many industries, cement producers still heavily rely on static pricing models with long-term contracts between vendors and buyers. This article will look at the technology behind digital pricing and the possible benefits for the cement industry.

by Dirk Schlemper and Thomas Bergmans, INFORM GmbH, Germany

'I don’t like Mondays' may well be a 1979 hit by The Boomtown Rats, but it is also a feeling that many of us subscribe to. However, according to research, it is actually the best day for penny-pinching car owners to buy cheap fuel. Monday morning usually marks the start of the weekly roller coaster ride of rising and falling fuel prices. They’re down one moment, up the next, and they’re different depending on where you live. To the average person there is little rhyme or reason to how these prices are determined, but it has always been common practice in the industry.

Other industries like airlines, hotels, and concert organisers jumped onto the bandwagon and abandoned their fixed pricing strategies more recently. With the growth of online shopping, the arrival of the ‘Uber economy,’ and wide-spread use of algorithms, the concept of dynamic pricing has reached new levels. On a flight we may accept that our seat neighbour did not pay the same price for his ticket as we did. The fact that our neighbour filled up their car for less isn’t a big problem either.

However, are we willing to accept this practice when buying cement? Will it be okay for construction companies that a Tuesday afternoon delivery of grey cement is cheaper than a Friday morning delivery, since this helps cement producers to increase traffic on days of weak frequency? Should cement producers revisit their current static pricing models and prepare for a transition to more dynamic models to overcome bottlenecks at plants and to attract customers that are more flexible with their demand?

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