Trust Your Suppliers, Not Their Data

By Rod Sherkin

April 21, 2016 at 7:46 AM

Of course you need to trust your suppliers: their products, delivery, quality and service. Makes sense or why would you want to do business with them? 

But that trust should not extend to the data they provide to support price increases! It's like asking the proverbial fox to guard the henhouse. 

Having independent sources of marketplace information is hardly a new concept. And so we were quite surprised by the results of a recent survey - 30% of the purchasers say their main sources of information for justifying price increases are the same suppliers that asked for the increases. 

"Sorry to have to raise prices. We have no choice because our own production costs are up.” Suppliers would then produce charts showing increases in their raw materials or labor costs or both. 

Outside sources of information are essential for two reasons. 

First, they allow you to gauge the reasonableness of a supplier's request. For example, in January 2016, two leading sources of steel costs information disagreed on price movement: One said up; the other down. Not surprisingly, the “up” figure was quoted by suppliers. 

Second, outside sources alert you when your suppliers' costs go down - something you are not likely to discover if you depend on suppliers for information. Can hardly fault suppliers: No one wants to lower prices voluntarily. 

There is good news: It has never been easier to build a window into your suppliers' costs. A wealth of data about raw material and labor costs abounds on the internet. Worth checking out, especially since many websites are priced so they pay for themselves the first time you use them. 

Tags: purchasing Supply chain management Negotiation Prices Procurement commodities sourcing costs
Category: Blog Post

Rod Sherkin


Rod Sherkin is the President of Inc. Established in 1999, ProPurchaser provides purchasing professionals with information and tools to help them better prepare for negotiations and raise the profile and status of the purchasing profession by increasing senior-management awareness of its strategic, profit-boosting potential.


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