New Audio Available for Media Use: Management Science Expert Pelin Pekgun on the Current Drivers Behind Our Inflationary Economy and Higher Prices

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New Audio Available for Media Use: Management Science Expert Pelin Pekgun on the Current Drivers Behind Our Inflationary Economy and Higher Prices

BALTIMORE, MD, January 28, 2022 – New audio is available for media use featuring Pelin Pekgun, an associate professor of management science at the Moore School of Business at the University of South Carolina. She is also a member of INFORMS, the largest association for the decision and data sciences.

In this audio content, Pekgun discusses the current drivers behind the current inflationary economy and higher prices. All sound should be attributed to Pelin Pekgun. There are 4 questions and responses. These responses were provided on January 27, 2022.

 

Question 1: What are the primary drivers in general behind the inflationary challenges America is facing right now? 

Time Cue: 00:31, Soundbite Duration: 00:43

“We are currently seeing the highest inflation rates in America in almost four decades, as reflected in the prices of food, gasoline, consumer goods, and others. So, what is driving this? On one hand, we see a significant shortage in supply with the ongoing COVID-19 pandemic due to continuing disruptions in global supply chains, factory shutdowns, logistics challenges, labor shortages, and increasing energy prices and production costs. On the other hand, consumer demand has spiked sharply beyond expectations as local economies reopened. So, it is this mismatch between the spiking consumer demand and the available supply that is driving the prices up.” 

 

Question 2: What are the primary factors companies and marketers are considering when setting prices right now?

Time Cue: 01:23, Soundbite Duration: 00:60

“With massive global supply chain disruptions, companies are observing increases in raw material costs, commodity prices, energy prices, production costs, labor costs, and logistics costs, which shrink margins. Given the limited supply to match the increase in demand, the natural reaction of companies is to increase their prices to remain profitable. However, there is a fine line between increasing prices in the short-term in reaction to eroding margins versus losing customers to competition, which could have long-term consequences. Unfortunately, most supply chains were not prepared for a disruption of this magnitude, and many sellers did not have the right tools in place to determine what price increases would be fair. On the other hand, we also observed unfair price increases for high-demand products where the lack of supply and alternatives created an almost monopolistic setting, which some sellers were able to take advantage of.”

 

Question 3: What can businesses do right now to minimize price increases to the extent possible?

Time Cue: 02:31, Soundbite Duration: 00:45

“This is the time for businesses to review their existing pricing strategies and develop a targeted, data-driven approach to sell the right product to the right customer at the right price through the right channel. Given the availability of rich data and sophisticated systems, businesses can utilize data and analytics to understand not only past customer preferences and behavior, but also changing trends over time. Estimating and predicting how customers will react to price increases is a critical input to be able to set optimal prices. Not all customers will have the same willingness to pay or react the same to price increases, though. So, it is also important to segment customers, and customize offerings and prices by customer segment.”

 

Question 4: What tools and systems are available to businesses to best arrive at fair prices for both the consumer and the seller?

Time Cue: 03:28, Soundbite Duration: 01:10

“First, this pandemic showed us the importance of building more resilient supply chains that are better prepared against major disruptions. Systems that provide better visibility at all stages of the supply chain, such as Industry 4.0 technologies, systems that enable better communication and collaborative planning across supply chain partners, designing effective contracts that provide stronger strategic partnerships with risk sharing between supply chain partners, and finally building some redundancy into the supply chain with a diverse supplier base and additional safety stocks would help reduce the impact of major disruptions, which, in turn, would improve the supply availability, and reflect on the prices. Second, utilizing tools that facilitate data-driven decision making with descriptive, predictive, and prescriptive analytics, would help sellers understand demand patterns over time, and come up with optimal prices as a function of cost inputs, available supply, demand forecasts, price elasticity, and competitor prices. Such an approach would not only help businesses arrive at fair tactical price changes but also devise effective long-term pricing strategies.”

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About INFORMS 

INFORMS advances and promotes the science and technology of decision making to save lives, save money, and solve problems. As the largest association for the decision and data sciences, INFORMS members support organizations and governments at all levels as they work to transform data into information, and information into insights that lead to more efficient, effective, equitable and impactful results. INFORMS’ 10,000+ members are comprised of a diverse and robust international community of practitioners, researchers, educators, and students from a variety of fields. 

 

Contact:

Ashley Smith

443-757-3578

asmith@informs.org