Be Prepared For a Price Increase

It is wise to prepare for a price increase announcement, especially during an inflationary period. There are a number of things you can do. One is going out into the marketplace and obtaining competitive quotes on what others are charging. Even though some of the competitors will have higher prices than what you are now paying, you will still know the difference in prices and what movement is possible or likely. Any increase in prices from your present supplier may result in paying more than what the competitor is charging.

Another step you can take if you are relatively certain that your supplier is going to raise prices is to ask for a price reduction before the increase has been announced. The psychology of that is that the supplier will then think twice about asking for an increase at all or reduce the amount of the increase that was intended.

By prepared for any announcement by knowing the price history from the present supplier. Make sure you know when the last increase was made and for how much prices have changed in the last twelve or more months. Be aware that frequent small increases within a short period amount to a large annual increase. The annual increase should not significantly exceed the increase on the published price increase.

Be prepared by asking for cost savings that counter the effects of the requested increase. Companies will often accept improvements in payment terms or other cost factors but will not budge on the amount of the price or price increases. It shouldn’t matter to the buying company if a savings can be obtained in other ways. Another saving may be possible by reducing packaging cost or by changing the required quality level or specification.

The supplier’s cost could be reduced if you increase the size of each order. This may encourage the supplier to give you a lower price because of volume. A longer term contract should have the same effect.

A redesign of the product with lower cost specifications may give you a lower price. Use your imagination to offer suggestions to keep cost under control.