I’ll start this out with a confession. Back when I had ‘real jobs’ and long before I got into sales support, pricing and software, I started out my business career as a buyer. In procurement job number one I was the field buyer on a large petrochemical construction project in southwest Louisiana.
I had to buy everything from large custom pressure vessels to work gloves and toilet paper. And I was in every salesperson’s worst nightmare. I ran bid tabs on everything and initially made all my buying decisions based on price. “Sorry, Supplier X. Supplier Y quoted $500 less on our $100,000 requirements list, so I went with them.”
I quickly learned (the hard way) that there’s more to procurement than shopping by price. My ‘ah-ha moment’ came when the $500 million project’s superintendent explained in passionate, colorful construction job site terms that even though I’d saved two percent on a large pipe, valves, and fittings order? The savings were kind of meaningless when the low-ball supplier missed the promised delivery date, leaving 25 union scale boilermakers standing around for a day.
Many years later, most of today’s procurement professionals embrace the importance of value to guide purchasing decisions, but they still have their noses to the ground when it comes to price. That’s why it’s time to take someone from procurement to lunch.
Where Are We Headed?
Pricing managers and pricing professionals have gradually earned respect in most organizations as they’ve proven their value as pricing experts. But as a pricing manager or pricing team member, you may only be a true expert on your pricing. Sure, you may have some data on competitor pricing, but we all know how unreliable that data can be. Why are sales and profits up or down? Is it price or something else (a topic for another discussion)? So, as we collectively wake up from our Covid nightmare, most pricers are weighing options on what to do about prices.
Are we entering an inflationary period or not? Some raw material costs are going up, but is it a long-term trend or just a hiccup in the supply chain? In what direction is the herd heading? Anything more than a small annual price increase used to be taboo. Is the pricing climate changing?
The last big inflationary period we had to live through was in the 1970s. One lesson that was learned is that perception can become reality. The Energy Crisis. Shortages. The economy entered an inflationary spiral. People expected price increases, so prices kept increasing. Is that where we’re headed?
A Pricing Manager’s Best Data May Be Right Down the Hall
The Institute For Supply Management’s most recent Report on Business shows manufacturing is expanding and in general prices are increasing – especially in most key commodities. Big Data. A valuable data point. But which way is the wind really blowing?
Prognosticators get paid to predict the future, but our recent shared experiences with the pandemic that very few experts saw coming and the resulting “we’re in for a nasty recession now” prognostications have turned out to be more than a little off the mark. Lots of data points to consider, but which dots should be connected?
It’s time for you, as a pricing manager or other pricing professional, to check out some data points that are right down the hall. Take your favorite procurement person to lunch. Get a feel for how things look from the other side of the counter so you can be bettered prepared to take pricing action when you need to.