One thing we can all agree on is that prices have risen since the end of the pandemic. Businesses and consumers have had to deal with a gradual and rapid product and service pricing shift.
According to the Bureau of Labor Statistics, the consumer price index increased 7.7% over the previous year. On the surface, the increase should not disrupt the economy as it is now, but here we are.
Implementing a price increase is an unavoidable action in any business. On the other hand, maintaining your product and service pricing will almost certainly result in poor-quality delivery.
At Expense To Profit, we look at how businesses and corporations can reduce operational costs while boosting revenues and returns. In this inflationary period, business execs are concerned that vendors are part of the problem, or the problem itself.
Questions arise if vendors raise the cost of materials because they need to cope with production costs or because they CAN. Well, according to a report, it appears the answer lies with the latter.
According to a Bloomberg article, companies in the United States had their most profitable year since the 1950s in 2021. Everyone in the supply chain, from vendors to retailers, is affected. However, these companies decided not to pass on these savings to customers by lowering their prices.
So, how do you handle vendors raising the prices of your raw materials? Let’s look into your options.
Contact A Cost Reduction Expert
Hiring the services of a professional cost-cutting consultant is one of the best decisions you can make at this point. Aside from price increases from vendors and suppliers, your company may be facing additional costs.
These costs also impact your markups, which are the difference between the prices charged at checkout and the costs incurred by your company to manufacture the product. That is why you need a cost-cutting expert to examine your business operations.
Expense To Profit has been helping small and large businesses improve their working processes and productivity for several years by assisting you to spend less and save more. We will thoroughly investigate your entire business process:
- We will examine your utility, telecommunications, payroll costs, procurement, purchasing, and other day-to-day operations spending.
- We will examine your vendors and invoicing to determine where your company may be overspending.
Following the review process, we will provide a comprehensive report. The report will include recommendations for lowering overhead expenses, saving your company even more money.
We do not charge a deposit. So, talk to us and let us do our jobs to keep your company from overspending.
Renegotiate With Your Vendors
Establishing long-term relationships with your suppliers and vendors is critical to the smooth operation of your business. Unfortunately, most vendors exploit this relationship by raising the prices of goods and services.
Based on what we’ve seen, vendors are increasing because they can. So now is an excellent time to review your vendor and supplier contracts. If there is one thing you should know, it is that prices can be negotiated.
Make them meet you halfway so you can renegotiate the price and payment terms.
Consider Other Alternatives
In business, you must consider the worst-case scenario. In this case, a vendor will refuse to renegotiate goods pricing. If things do not go as expected, you can consider other options.
One of the best ways to explore this is to e-source for reverse auctions. This process entails you requesting to purchase an item(s) and inviting vendors to compete and sell that item(s) at their best price via a request for a quote (RFQ). At the end of the bidding process, you choose and contact the vendor with the lowest possible price.
Reverse auctions are smooth processes in which you settle for the best prices, eliminate supply waste, and deliver orders on time.
Check Out Your Competitors
It is essential to look at what your competitors are doing while you take pre-emptive actions for your business. In addition, it is beneficial to know their current pricing, as it would enable you to properly gauge and develop a competitive price for your goods and services.
Another reason is that it will allow you to determine which direction customers are drawn. As a result, you can better plan and prepare. To determine a price benchmark, conduct a market analysis of three competitors.
While businesses face inflation, policy changes, and vendor cost increases, you can always keep your business afloat by following the steps outlined above.
Expense to Profit is a leading cost-reduction consultancy created to help businesses to improve their profit margins while lowering expenses. We can improve your bottom line with proven and tested strategies tailored to your needs
Call Today for a free consultation and expense reduction analysis.
Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.