Seasonal Commodities: Spring Has Sprung!<\/h3><\/div><\/div><\/div>PurchTips edition #372<\/p>\n<\/div>
Are The Commodities You Buy About To Go Up In Price?<\/h4><\/div><\/div><\/div>Spring is officially here! As a human, I love Spring. As a procurement professional, I hate Spring.<\/p>\n
While Spring brings some beautiful weather, it can bring some ugly price increases in certain commodities. For example, US gas prices usually increase $0.35-$0.75\/gallon between February and May.\u00a0 Also, Spring weather plays a part in determining crop choice and, therefore, supply and prices for various agricultural commodities later in the year.\u00a0 You probably buy commodities that experience seasonal fluctuations.<\/p>\n
For those seasonal commodities that you buy, you need to develop a contracting strategy. In developing your seasonal commodity contracting strategy, you have a few different options:<\/p>\n
\n- Lock in a fixed price.\u00a0<\/strong>Some executives love predictability. Especially for raw materials that go into finished products that must be sold at a fixed price over a period of time. With this strategy, you might end up paying more because suppliers have to pad their price to account for their risk. But it pays off when predictability is valued and\/or if prices in the broader market rise more substantially than expected.<\/li>\n
- Buy \u201chand-to-mouth.\u201d<\/strong>\u00a0This means not contracting with a supplier, but buying what you need, when you need it, at the market price at the time of purchase. While this assures that you\u2019ll never pay more than the market price, it lacks the value that predictability and contractual assurance of supply offer. However, it can pay off financially in times of declining prices and ample supply of seasonal commodities.<\/li>\n
- Agree to an index-based adjustable price.<\/strong>\u00a0An index-based adjustable price shares risk between buyer and supplier, so suppliers are less likely to pad their prices. While this approach lacks predictability, it does enable you to contractually secure supply. Plus, it can pay off if market prices drop lower than predicted.<\/li>\n<\/ul>\n<\/div><\/div><\/div><\/div><\/div>
Want A More Rewarding Procurement Career?<\/h5><\/div>![](\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2021\/04\/career.jpg\" "\\"career\\"")
<\/span><\/div>Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n
Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>
PurchTips edition #372<\/p>\n<\/div>
Are The Commodities You Buy About To Go Up In Price?<\/h4><\/div><\/div><\/div>Spring is officially here! As a human, I love Spring. As a procurement professional, I hate Spring.<\/p>\n
While Spring brings some beautiful weather, it can bring some ugly price increases in certain commodities. For example, US gas prices usually increase $0.35-$0.75\/gallon between February and May.\u00a0 Also, Spring weather plays a part in determining crop choice and, therefore, supply and prices for various agricultural commodities later in the year.\u00a0 You probably buy commodities that experience seasonal fluctuations.<\/p>\n
For those seasonal commodities that you buy, you need to develop a contracting strategy. In developing your seasonal commodity contracting strategy, you have a few different options:<\/p>\n
\n- Lock in a fixed price.\u00a0<\/strong>Some executives love predictability. Especially for raw materials that go into finished products that must be sold at a fixed price over a period of time. With this strategy, you might end up paying more because suppliers have to pad their price to account for their risk. But it pays off when predictability is valued and\/or if prices in the broader market rise more substantially than expected.<\/li>\n
- Buy \u201chand-to-mouth.\u201d<\/strong>\u00a0This means not contracting with a supplier, but buying what you need, when you need it, at the market price at the time of purchase. While this assures that you\u2019ll never pay more than the market price, it lacks the value that predictability and contractual assurance of supply offer. However, it can pay off financially in times of declining prices and ample supply of seasonal commodities.<\/li>\n
- Agree to an index-based adjustable price.<\/strong>\u00a0An index-based adjustable price shares risk between buyer and supplier, so suppliers are less likely to pad their prices. While this approach lacks predictability, it does enable you to contractually secure supply. Plus, it can pay off if market prices drop lower than predicted.<\/li>\n<\/ul>\n<\/div><\/div><\/div><\/div><\/div>
Want A More Rewarding Procurement Career?<\/h5><\/div><\/span><\/div>Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n
Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>
Spring is officially here! As a human, I love Spring. As a procurement professional, I hate Spring.<\/p>\n
While Spring brings some beautiful weather, it can bring some ugly price increases in certain commodities. For example, US gas prices usually increase $0.35-$0.75\/gallon between February and May.\u00a0 Also, Spring weather plays a part in determining crop choice and, therefore, supply and prices for various agricultural commodities later in the year.\u00a0 You probably buy commodities that experience seasonal fluctuations.<\/p>\n
For those seasonal commodities that you buy, you need to develop a contracting strategy. In developing your seasonal commodity contracting strategy, you have a few different options:<\/p>\n
- \n
- Lock in a fixed price.\u00a0<\/strong>Some executives love predictability. Especially for raw materials that go into finished products that must be sold at a fixed price over a period of time. With this strategy, you might end up paying more because suppliers have to pad their price to account for their risk. But it pays off when predictability is valued and\/or if prices in the broader market rise more substantially than expected.<\/li>\n
- Buy \u201chand-to-mouth.\u201d<\/strong>\u00a0This means not contracting with a supplier, but buying what you need, when you need it, at the market price at the time of purchase. While this assures that you\u2019ll never pay more than the market price, it lacks the value that predictability and contractual assurance of supply offer. However, it can pay off financially in times of declining prices and ample supply of seasonal commodities.<\/li>\n
- Agree to an index-based adjustable price.<\/strong>\u00a0An index-based adjustable price shares risk between buyer and supplier, so suppliers are less likely to pad their prices. While this approach lacks predictability, it does enable you to contractually secure supply. Plus, it can pay off if market prices drop lower than predicted.<\/li>\n<\/ul>\n<\/div><\/div><\/div><\/div><\/div>
Want A More Rewarding Procurement Career?<\/h5><\/div>
<\/span><\/div>Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Nothing will change unless you take action towards becoming a world-class procurement professional. Work your way up NLPA\u2019s CPO Suite Programs, an enhanced version of our SPSM certifications and bring the most modern procurement practices into your organization and achieve your career potential.<\/p>\n
Download our NLPA Course Catalog<\/strong> for a comprehensive list of the CPO Certification Programs and their corresponding modules per level.<\/p>\n<\/div>
- Buy \u201chand-to-mouth.\u201d<\/strong>\u00a0This means not contracting with a supplier, but buying what you need, when you need it, at the market price at the time of purchase. While this assures that you\u2019ll never pay more than the market price, it lacks the value that predictability and contractual assurance of supply offer. However, it can pay off financially in times of declining prices and ample supply of seasonal commodities.<\/li>\n