With 2017 rapidly approaching, the time to look at budgets for next year is upon many businesses. And for many suppliers, the time to open up a dialogue about proposed January price increases has also begun.
Since the beginning of November we have been working with our clients to successfully repel proposed increases from their suppliers which have ranged widely between 7% and 44%.
A conversation about price increases can be a regular occurrence at this time of year, but some of the events of 2016 are making this year’s conversations particularly tricky for clients to navigate.
In nearly every case these suppliers have been stating the cause for the rises as Brexit and weakening of Sterling against the Dollar and Euro. Whilst no one can deny the drop in the pound against these currencies, the level of proposed price increases far outweigh this factor.
There are some legitimate reasons for increases which we can accept on behalf of clients, but these are not in the double digit range. We’ve seen many cases where the increases are being presented to all customers as immovable objects – and sometimes with the start date for the new pricing being around a week away – leaving many with the impression there is no alternative but to accept these as standard.
We are also finding that our clients are asking for our input in helping them to make decisions regarding proposed increases in areas of spend where we are not currently engaged.
Because our specialists have regular visibility of the kind of market information that helps clients to make an informed decision, we are being seen as a vital resource to assist with price increase negotiations across the board.
In our recent survey of CIPS members in September 2016, 55% believed that Brexit will make no difference to their procurement. It would be interesting to ask the same question again today, as by now many respondents will be starting to see suppliers beginning to make their moves.
The survey also indicated that 63% believe they would benefit from external resources to help with their procurement; it seems that the current pricing pressures would be the ideal opportunity to engage with some third party expertise.
We are able to offer our clients unrivalled expertise and market knowledge to assist them in determining which price increases suggested by suppliers are indicative of genuine market pressures and which are opportunist suppliers trying to recover margin, or even take advantage of the lack of internal knowledge and resource at the clients’ end.
We would be happy to discuss what challenges your organisation is facing going into 2017 and how we may be able to assist you in determining which of the proposed price increases you face are genuine and which can be negotiated or eliminated.
Many organisations will feel that a successful negotiation, resulting in a lower than anticipated increase is a good result, but without our total market visibility, how do they know whether their pricing was in the right ballpark to begin with?
For more information about how our market specialists can help mitigate against your price increases, please get in touch.