How to make Product Price Adjustment Mechanism work for your business
Please see below a write-up of our experience of the different business models and how to make them work
Models you can run
The ProcureAnalytiq system allows you to set up different types of models and collaborate with suppliers and customers. Here are the models you can set up.
simple price mechanism
Agree a simple product price adjustment mechanism with your customer or supplier, tracking just 1 or 2 key feed-stocks or risks. It will reduce business risk and simplify the quarterly price adjustment process
complex price mechanism
A more complex product price adjustment mechanism can include multiple feed-stocks and risk exposure on both sides of the commercial relationship to ensure pain and gain are equally shared at all times.
full price mechanism
Product price mechanisms can include all elements of the price relationships, including rebate agreements, cost saving targets, financial risk, feed-stocks, etc. There are practically no limits to the creativity that can be applied
DELIVER DIRECT MATERIAL SAVINGS
ProcureAnalytiq is an online cloud-based software tool to track market developments and leading indicators related the direct material purchases for your business.
ProcureAnalytiq enables user to faster reaction to market changes, better negotiations, automated forecasting of material pricing, better internal and external communication, and ultimately reduces direct Raw Material prices.
Interested to explore more?
Introduction to price mechanisms
Use-cases of price mechanism tools
How to set up a price mechanism
Reduce Business Risk and Surprises
Agreeing a product price adjustment mechanism will reduce business risk without limiting opportunities for future improvements.
eliminate key risk
Capturing key risk in a product price mechanism will limit the potential loss you may face
A product price mechanism will give you short term view of likely price developments
Improved supplier relations
Indexing the key feedstocks of your raw materials will balance the relationship with your supplier and reduce your and their risk
Greater awareness when a commercial relationship is out of balance
Higher awareness of market developments will lead to better decision making
Improved customer relations
Taking some of the quarterly friction out of the price negotiation, and managing risk on both sides will reenforce the partnership model. And it will allow you to focus on the value-add int he relationship
Transparent agreements and indexes will balance the relationship
Manage expections and reduce risk for both parties. In the long run, it will differentiate you as a supplier