Cost volatility is nothing new for manufacturers and distributors. Tariffs may be today’s trigger, but inflation, supply shocks, and rising service expectations will keep testing pricing teams. Let’s break down the four-step response model high-performing pricing organizations use to protect margins, move faster, and maintain customer trust, no matter what disruption comes next.
Cost volatility never really goes away. It just changes shape.
One year it’s inflation. Another year it’s supply chain disruption. Then it’s labor shortages, freight swings, or new regulations that shift the economics of doing business overnight.
And right now, tariffs are today’s trigger.
The details may vary, but the challenge is the same: sudden cost pressure forces manufacturers and distributors to make pricing decisions quickly, under uncertainty, and with real margin risk on the line.
What separates high-performing pricing teams isn’t that they avoid volatility. It’s that they’ve built a repeatable response model. They don’t react emotionally or scramble for last-minute fixes. They respond strategically, grounded in data, discipline, and customer trust.
Volatility isn’t the exception anymore. It’s the environment.
So how do leading pricing teams respond when costs shift unexpectedly? They follow a simple playbook built around four steps: review, gather, model, and communicate.
Step 1: Review Recent Performance
High-performing teams look backward before they move forward with any pricing move.
Pricing leaders in manufacturing and distribution have seen cost shocks before. The pandemic offered a clear reminder that companies that move quickly are more likely to protect profitability when faced with sudden increases, whether from material shortages, supply chain constraints, or global disruption.
And the past few years have showed that many businesses had more pricing power than expected. In many cases, price increases went beyond general inflation because demand remained strong and supply remained constrained.
But conditions are shifting again.
Market stability is returning in some areas, and customer tolerance for repeated increases may not be unlimited. That’s why pricing teams need to assess a critical question: Do we still have the ability to pass through costs in today’s environment?
The takeaway is simple: Pricing power is not guaranteed. Cost volatility will test it repeatedly. Reviewing what happened during recent pricing cycles helps teams act decisively without overcorrecting.
Looking for more information about pricing power?
Check out our free resource → Pricing Power: The Best Practice for Profit Growth
Step 2: Gather the Right Data
Not all cost volatility hits the same way. Some businesses experience direct cost increases. Others feel indirect impacts through supplier hikes, logistics disruptions, or changing input availability.
That’s why high-performing pricing teams don’t jump straight to price changes. They gather facts first. The goal is to understand true exposure at the product, supplier, and customer level.
Key questions include:
- Which products or materials are most affected?
- Are supplier increases legitimate, or inflated?
- What secondary cost effects are emerging?
- Are there alternatives or substitutions available?
In tariff scenarios, for example, teams may use tools like the Harmonized Tariff Schedule (HTS) to pinpoint the exact rates applied to imported materials.
But the broader principle applies beyond tariffs. Pricing teams need clear, defensible inputs before making adjustments, whether the trigger is inflation, freight, or labor costs. Without that clarity, pricing decisions become guesses and miscalculations can erode margin or customer trust quickly.
Data-driven insights ensure pricing actions are accurate, targeted, and explainable.
Step 3: Model the Financial Impact
Cost shocks create urgency, but urgency should never replace financial reality. High-performing pricing teams know that a headline increase doesn’t translate directly into a simple price hike. A 25% tariff does not mean a 25% total cost increase. Weighted cost structures, operational efficiencies, and product mix all influence the real impact.
That’s why modeling is essential. Leading teams run the numbers before making moves. They build scenarios to answer:
- How will this cost increase affect gross margin?
- What price adjustment is needed to offset it?
- How much of the increase should be passed through?
- What other pressures need to be considered, such as labor, logistics, sales adjustments?
A smaller price increase can often offset a larger cost change, depending on margin structure. The key is precision.
Companies that take a measured, data-backed approach avoid two dangerous extremes:
- Absorbing too much cost and losing profitability
- Overcorrecting and creating unnecessary customer resistance
Scenario modeling turns volatility into manageable decision-making.
Step 4: Communicate with Flexibility and Trust
Pricing isn’t just math. It’s also messaging. High-performing pricing teams understand that how you communicate changes is just as important as the change itself.
Some cost disruptions, like tariffs, may be temporary or politically driven. Others may ease over time as supply chains stabilize or input costs fall.
Treating every increase as permanent can damage customer relationships. Leading companies signal flexibility. Instead of embedding all increases into base prices, they may use temporary surcharges or clearly separated line items on quotes and invoices.
The best teams execute communication with transparency:
- Explain why pricing is changing
- Signal that adjustments may reverse if conditions improve
- Monitor competitor actions to stay aligned
- Maintain customer confidence while protecting margin
Trust is a pricing asset. Strong communication preserves it.
A Repeatable Checklist for Cost Volatility
High-performing pricing teams don’t reinvent the wheel every time volatility hits. They rely on repeatable processes.
A simple action checklist includes:
- Identify exposure at the SKU and material level
- Model financial impact through P&L scenarios
- Decide on pricing strategy: direct pass-through or phased increases
- Communicate early and clearly with customers
- Monitor cost-to-serve factors like freight and labor
- Use the disruption as a catalyst to strengthen long-term pricing discipline
Volatility will come and go. Pricing maturity remains.
The Teams That Lead Don’t Wait for Change
The best pricing teams don’t treat volatility as chaos. They treat it as a strategic moment, review what history has taught them, gather accurate data, model the financial reality, and communicate with clarity and trust.
Tariffs may be today’s trigger. But the lesson is broader.
Cost volatility isn’t going away. The teams that build agility, discipline, and confidence into pricing will be the ones that protect profitability and shape their markets, no matter what disruption comes next.
Are you ready to more effectively tackle tariffs? Set up a demo with Vendavo experts today.
Looking for a roadmap to understand and manage the financial changes that impact your business every day, especially with tariffs in play?
Download our free resource → Pricing for Tariffs Playbook for Manufacturers and Distributors