How to Fight Price Increases in Inflationary Markets
The rise of inflation, particularly in raw materials, poses significant challenges for companies across various industries. Escalating prices of essential inputs like energy, metals and commodities that can squeeze profit margins, disrupting production processes and impact overall business operations. Hudicor applies a 3-step approach to exploit the full economic potential of today’s supplier markets.
- Apply ‘should cost’ modelling techniques
Should-cost modelling, also known as cost-breakdown reviews what a product or service should cost based on raw materials, manufacturing labor, overhead and markup costs. As a result, you get a better understanding of your supplier’s cost structure and their margins before and after inflation. This leads to optimal fact-based negotiations. - Search for alternatives
Use global strategic sourcing to consider other geographical areas and other marketplaces to identify more potential suppliers. Geographically, inflation-related price increases can vary greatly. With this method, you benefit from geographical differences in inflation rates as well as increased negotiating power. - Review the supply chain to expand negotiations beyond price
Reviewing your supply chain is crucial in allowing companies to identity vulnerabilities, assess potential risks and explore alternative sourcing options (such as index-based contracting, storage facilities and supplier consolidation) to mitigate cost pressure. By conducting a comprehensive evaluation, businesses can optimise their supply chain, enhance resilience and make informed decision to navigate the challenges posed by inflation in prices of raw materials.
