The answer is almost everything is up or headed up, and procurement professionals need to be careful, intelligent and plan thoroughly if they do not want to get taken advantage of.
If you had the tools to check all of the market indices, they are all up or headed up. Fuel, pulp, resin, metals, beef, grain and the list goes on. Many are up double digits over the last year and headed higher still. As such, your suppliers will be increasing their prices to you.
It is in this environment that procurement professionals are being asked to take cost out of the business or at a minimum hold costs flat. The question is how?
To begin with, even in up markets there remains significant opportunity for cost reduction and other savings. This does not apply to every category or to every product within a category, but there are opportunities.
Here are some things for procurement professionals to consider as they embark on this journey. All of these can provide clues that will help you map your way through today’s markets.
1) Review the last time all products or services were sourced in detail?
2) Review the dates on all current contracts?
3) Are there additional suppliers that are interested in your business?
4) Review all Terms and Conditions to uncover hidden opportunities.
5) Have your volumes increased or will they?
6) Will a longer term increase discounts?
7) Leverage freight and shipping terms?
8) Use indices and escalator language to control price increases.
9) Understand what drives the pricing of the product or service you are buying.
10) Aggregate your volumes with other companies.
11) Reach out to procurement providers that have the expertise to help you.
If you can’t come up with at least another 10 items to add to this list of more than 3 of the items above did not occur to you, it’s time to reach out for some help.
The reality is that prices are always going to go up over the long term. The other reality is that there are companies that are still saving or holding costs. The reason is because they plan better than most and ask for help when they need it.
We look forward to and appreciate your comments.