Gaurav Sharma
Jan 4, 2024
Industrial Commodity prices are on the increase; Time your Negotiations accordingly! Fast!
Here are the monthly movements (Dec'23 vs Nov '23) for some of the commodities.
Gainers:
1.) Aluminium (8.7%)
2.) Palladium (8.1%)
3.) Zinc (7.9%)
4.) Platinum (6.5%)
Losers:
1.) Nickel (-0.3%)
2.) Lead (-2.7%)
3.) Silver (-5.9%)
4.) Natural Gas (-12.8%)
The Big question is, what do these numbers mean for a Category Manager? How can we use this information in our sourcing strategy or negotiation?
In my view, it means two things:
a.) The raw material cost is going to increase for capex buyers (equipment purchases, spare part purchases, electronics and IT hardware purchases)
b.) The cost of manufacturing is going to decrease as natural gas and other sources of fuel are on a decline.
Also, we are expecting a muted demand in Q1 2024. So, I recommend following:
Delay your negotiations or extend the discussions.
There should be no hurry to close anything urgently
Muted demand would mean lower factory utilization rates for your suppliers and manufacturers. Use this to demand lower unit prices, especially using point b, as mentioned above
Lastly, do expect the supplier to mention point a (increasing cost of raw materials) as an argument during the negotiation. Hence, prepare your defence accordingly