Thursday, June 29, 2006
Don’t Be Such A Stranger
In a volatile raw materials market, re-evaluating sourcing strategies may be the key to salvaging the bottom line. Expect to see more of your purchasing agent.
Early this morning Tokyo stocks fell based on fears that manufacturers’ bottom lines are being spanked by dramatically spiking costs for raw materials and other commodities (a barrel of crude oil fetches $72 as of yesterday). Procurement boffins forecast a 9% rise in the overall cost of raw materials for 2006, but by spring it was pretty clear they’d have to revise that upwards—in April, according to Purchasing.com, the cost of raw materials had already risen 10%. Costs have continued climbing since then, and are affecting everyone from packaging manufacturers to the makers of batteries. Chemicals, lumber, metals, rubber, paper—nearly everything used to make anything has risen in cost.
What can procurement agents do to make sure they’re getting the best value per spend dollar? According to a recent Aberdeen Group report, “The Direct Materials Sourcing Benchmark Report”, (PDF, free registration may be required) communication helps. Re-evaluating sourcing strategies and company needs more frequently can help procurement agents adjust their buying habits in a volatile market. Procurement agents can pick the brains of designers and accounting personnel at their company to determine alternative materials that might not sacrifice quality or to decide on a new source.
