North American resin prices continue to be extremely dynamic, offering manufacturers of plastics products a unique opportunity to lock in long-term agreements with favorable pricing. Demand for resins will begin to rebound as key industries scale back up, and historically low oil prices are already beginning to trend upwards. Most North American resins saw price declines in April (“COVID-19 drives commodity resin prices down in April”, Frank Esposito, Plastics News, published May 15, 2020). … [Read more...]
How are Historically Low Oil Prices and the Collapsing Global Economy Impacting Resin Costs?
Plastics manufacturers are being hit by the simultaneous forces of supply interruptions, vastly changing demand, and volatile petroleum prices. So far, commodity polymer prices have slid slightly, but there are numerous opportunities to negotiate larger price reductions from resins suppliers if you know where to look. The key factors that determine if the specific resins you purchase are candidates for aggressive cost-downs are: Do you know which resins are more affected by Crude Oil … [Read more...]
4 Key Post Covid-19 Considerations for Automotive Purchasing Leaders
APD asked long-time friend and noted economist Jon Gabrielsen to provide 4-5 key points purchasing leaders should consider in planning post Covid-19 strategies and activities. His thoughts are: Don’t plan on a V-shaped rapid recovery Peak auto sales will not return to 2018 levels Expect Supplier and customer bankruptcies and consolidations Global trade will be replaced with regional trading blocks Below are his thoughts on each of these items: No V-shaped recovery The … [Read more...]
Managing the Urgent and Important During the Covid-19 Crisis
I was the Chief Purchasing Officer of a company when the economy tanked, and the CEO told his senior staff of the requirement to cut headcount by a significant amount. Inside my head, I rejected the directive: How could my team manage the supply chain disruption of a major recession, deliver our strategic plan, and reduce our headcount? Outwardly, I raised no objections because those who did were facing stiff opposition. Instead, I waited and put a plan together detailing the actions … [Read more...]
Purchasing Cost Models: How Buyers Can Use Cost Models Effectively
This blog is the third of a three-part blog series designed as follows: How cost models help companies succeed The types of cost models buyers of manufactured products use. How buyers can use cost models effectively Earlier this year, we surveyed over 30 sales and marketing professionals and CEOs at automotive suppliers to understand which types of cost models their customers were using and how they are using them. Their insights, added to our experience, provide interesting … [Read more...]
Types of Cost Models Used by Buyers of Manufactured Products
This blog is the second of a three-part blog series designed as follows: How cost models help companies succeed The types of cost models buyers of manufactured products use How buyers can use cost models effectively We see four types of cost models being used by buyers today: Open book cost modeling Knowledge-based modeling Hyper-optimized cost modeling Attribute-based cost modeling Open Book Cost Modeling Open book cost modeling utilizes information provided by … [Read more...]
How Purchasing Cost Models Help Companies Succeed
This blog is the first of a three-part blog series which will discuss: How cost models help companies succeed What types of cost models do buyers of manufactured products use How buyers can use cost models effectively Cost models provide buyers with valuable benchmarks to validate supplier pricing. Used effectively, they help drive optimal design, reduce the time required to bring products to market and help companies succeed. When it comes to understanding supplier cost … [Read more...]
If Value Matters, Why am I Measured on Cost?
100% of the CEO’s we surveyed want purchasing to deliver value, only 58% think value is being delivered. When we look at the metrics used to measure performance we often find: Purchasing is measured on price reductions alone, not on value provided Purchasing alone has ownership of the cost/value goal Metrics are short term/current year focused Price vs. Value Our experience indicates that Chief Purchasing Officers are measured on purchase order price reductions. We rarely … [Read more...]
Ending the War Over Cost Breakdowns
When writing about cost breakdowns, famed negotiation trainer Chester Karrass opined “Buyers should always ask for detailed cost breakdowns and suppliers should always refuse to provide them”. Buyers often win this first battle of the cost breakdown war through the use of carrots and sticks; carrots being incentives like new business awards or preferred supplier status and sticks being punishment that your quotation will not be accepted without them. However, that is just the first battle … [Read more...]
4 Steps to Lower Material Costs
Experience has taught us that buyers who understand should-be costs achieve prices that are 8-18% lower than buyers who do not. One practice employed by buyers is the use of cost breakdowns. Buyers who achieve the best results from breakdowns employ the following: Utilize commodity specific cost breakdowns - Trying to use one format that incorporates the needs of many commodities often results in a breakdown that is too complicated and unlikely to provide useful data from suppliers. … [Read more...]
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