As our Supply Chain Matters readers are likely aware from media stories, the recent incidents of both Hurricane Harvey and Irma, coupled with the dual punch of a massive earthquake and Hurricane Katia that struck separate parts of Mexico, reflected many reports of price gouging leading up to and after these events. That included essential supplies such as dry foods and water sold on online sites such as Amazon and other online retailers, airline ticket sales or shared ride services from residents and tourists hoping to escape the impacted areas, along with other physical retail essentials such as fuel and survival gear. In Florida alone, there were in-excess of 8000 recorded incidents of price gauging prior to Irma, and recovery efforts are just starting. Similarly, recovery supplies are still pouring into the Texas Gulf region.

Today, we all exist in a world of supply-demand pricing algorithms that can dynamically and instantly change prices as consumer demand activity far exceeds available supply. We have all experienced these algorithms in one form or another. They serve as important revenue management capabilities for businesses but the last thing anyone wants to experience during a pending natural disaster are items such as bottled water or a one-way airline ticket priced hundreds of percent higher than normal demand levels. Another dimension is when franchised retailers or distributors take it upon themselves to seize on an opportunity of insatiable demand. Yes, these might be argued as natural forces of the market, but a brand image takes a significant beating for those consumers and their extended families that were affected. On Saturday, Florida Attorney General Pam Bondi warned would-be price gougers ahead of Hurricane Irma that she would say their name “all over” the U.S. if they did not stop. Definite brand names were called out as a circle of shame.

This is the ugly side of today’s advanced technology, the reality that human intervention and compassion is still an important requirement when unplanned or extraordinary events occur.  How many of today’s price optimization applications provide real-time alerts to such demand events and which organization receives such alerts. Many probably do but who in the organization has the authority to override automatic pricing actions. How many levels of management approval are required and how long does it take? Who is not willing to tell a boss that this is wrong and not a reflection of our brand and our compassion?

We all know that there will surely be many lessons garnered from tragic and destructive natural disaster events that have impacted respective Caribbean Islands, India, Mexico, and the United States, all within a two-week timeframe.  One should be that pricing optimization technology needs a human intervention reset button. Any brand needs to stand for compassion in the time of greatest need, before and after the fact.

 

Bob Ferrari