We run a manufacturing and distribution business with fluctuating raw material costs. How do we safely use AI to analyze our supplier pricing and adjust our customer quotes in real time without letting a computer algorithm destroy our gross margins?

Question

Tyler Smith · Accepted Answer

Using AI to automate pricing changes can protect your margins, but giving an algorithm absolute control over your pricing is highly risky. You must design a system that combines the analytical power of AI with human veto power.

First, build a model that continuously pulls supplier pricing and freight costs, comparing them against your historical pricing rules. The AI can calculate proposed adjustments to your customer quotes based on pre-set target margins. This process saves hours of manual spreadsheet calculations and allows you to respond rapidly to market shifts.

Second, establish clear operational thresholds. For example, if the AI proposes a pricing change of less than five percent, the system can automatically update the quote. However, any proposed adjustment above that threshold must be flagged for manual review by the owner of your sales or finance seat.

Your finance seat holder must have the GWC™ to understand the background logic of the pricing model. They must review the high-variance recommendations to ensure the AI is not reacting to a temporary spike or data error. By keeping a human in the loop for major decisions, you capture the efficiency of automated adjustments while protecting your client relationships and your company's bottom line.