Is it possible to compress commodity driven prices in this market?
One thing is for sure; if you don’t ask you will never know.
There are a lot of factors that drive prices, if that was not true, why can I drive 5 miles from my house and pay twenty cents less per gallon than right around the corner. Why is gas cheaper in Boston than it is in Scottsdale? Why do eggs cost less at the local inner city convenience store than they do at the local chain that won’t come in to the inner city and buys from the same wholesaler? There are a lot of answers to these questions; many of which consumers would not like.
Many companies think that because commodity indices are up that they should not even bother to try and compress pricing.
This is the precise reason why some companies are profitable and others are not. Just because the commodities that are the basis for products we buy are up, is no reason to not try and compress pricing through the use of e-negotiation tools or other more traditional methods. With that said e-negotiation tools will make the process much easier and insure compression in a much shorter period of time.
Whether or not a retailer is willing to share savings with consumers when using these programs is a whole other discussion and could be a reflection on some of their other program offerings they have not been successful.
There is a lot that goes in to the products companies buy and maybe even more in the prices they pay. Two things are certain. There will always be suppliers that want to bid on your business. There will always be suppliers that are willing to invest to get your business. This dynamic is what will allow you to compress prices in an up market.
Understanding everything about what you re buying and what drives its pricing and using the proper tools to leverage the supply base can and will result in price savings even in an up market.
We look forward to and appreciate your comments.