Sourcing/Procurement Trends
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New Cost/Price Dynamic Means Opportunity for Supply Chain Managers
Cost of manufacturing falling in many sectors, but wholesale prices not following same path, putting greater negotiating power in buyers' hands
Port Angeles, WA — December 3, 2008 — The cost of manufacturing fell sharply among U.S. manufacturers in October, but wholesale prices that manufacturers charged for their products often did not follow the same deflationary path. As a result, margin performance from September to October exceeded expectations, and strategic supply chain managers now are enjoying new negotiation power, according to the latest ALERTdata report from Thinking Cap Solutions.
According to the most recent solve of the www.ALERTdata.com cost model, 427 manufacturing industries saw their production costs decline from September to October. Sixty-nine industries saw production costs drop 5 percent or more.
Wholesale prices, meanwhile, have not fallen as fast, or have not declined at all. The U.S. Bureau of Labor Statistics reported that 169 manufacturing industries dropped their average prices from September to October. Another 238 industries, however, actually increased their average wholesale prices.
"In this uncertain economic environment, U.S. manufacturers apparently are holding back on passing through cost cuts in an attempt to shore up their margins," said Elizabeth Baatz, economist and editorial director for ALERTdata. "Rapid changes in cost escalation and economic uncertainty are creating new opportunities to renegotiate contracts at lower prices. Companies that have a strong supply chain management team can take advantage of these conditions."
Analysis from ALERTdata of the latest October price/cost trends shows margins improved in 419 industries. Only 38 industries saw their manufacturing margins deteriorate from September to October.
"Supply chain managers and purchasing pros who track these volatile cost/price trends may now be in a position to push for price cuts," said Baatz. "Margin analysis finally is favoring buyers in some 150 different industries."
According to the most recent solve of the www.ALERTdata.com cost model, 427 manufacturing industries saw their production costs decline from September to October. Sixty-nine industries saw production costs drop 5 percent or more.
Wholesale prices, meanwhile, have not fallen as fast, or have not declined at all. The U.S. Bureau of Labor Statistics reported that 169 manufacturing industries dropped their average prices from September to October. Another 238 industries, however, actually increased their average wholesale prices.
"In this uncertain economic environment, U.S. manufacturers apparently are holding back on passing through cost cuts in an attempt to shore up their margins," said Elizabeth Baatz, economist and editorial director for ALERTdata. "Rapid changes in cost escalation and economic uncertainty are creating new opportunities to renegotiate contracts at lower prices. Companies that have a strong supply chain management team can take advantage of these conditions."
Analysis from ALERTdata of the latest October price/cost trends shows margins improved in 419 industries. Only 38 industries saw their manufacturing margins deteriorate from September to October.
"Supply chain managers and purchasing pros who track these volatile cost/price trends may now be in a position to push for price cuts," said Baatz. "Margin analysis finally is favoring buyers in some 150 different industries."
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