More evidence that cost avoidance is just as valuable as savings
Today’s post is by Dave Wenig is the Senior Vice President of Sales and Services at SafeSourcing Inc
Last month, I wrote about cost avoidance and the how the impact of avoiding a cost increase can be just as beneficial as creating savings. In reality, I would argue that the difference between cost avoidance and savings is minimal.
We measure savings as current cost (what you’re paying for something today) minus the cost we are able to negotiate using our eProcurement process including an online RFQ Event. If you’ve received a price increase, then you can no longer buy whatever you were buying at your previous price. Because of that, the old price is no longer your current price. Current price defaults to whatever price you can actually expect to pay. That might not seem with pointing out, but it’s very relevant with today’s fast changing prices for things like freight costs, pulp costs, resin costs, and labor costs which will alter the pricing of nearly anything you would buy.
I’m not exaggerating when I say that I have several conversations with customers every single day about rising costs. This week, I heard about price increases in categories such as shelled eggs, salsa, tomatoes, sour cream, and more. I had conversations with some people who still think they haven’t seen this in full effect yet. I’ve had conversations with people who, like me, believe we’ve been seeing this in effect for at least all of this year. We’ve forced back many of these price increases significantly. As one final example of what I mean, here’s a graph from our new SafeSourceIt™ Event graph view that shows a corrugate product RFQ where the incumbent vendor (yellow) had just passed along a price increase that they said was necessary and based on the markets. You be the judge, but I don’t believe that price increase is justified based on the final pricing submitted by that vendor’s competitors (blue, green, orange).
You have the ability to do this too. Don’t keep accepting cost increases and wishing you could create cost reductions. Contact SafeSourcing with your procurement needs and we can help. For more information, please contact SafeSourcing.