How You Predict the Low Price Time

Date: 04/01/2005

Most buyers for business are forced to obtain products and services when an employee from another department asks for them. This doesn’t matter much for the majority of products, because the prices for those items are not volatile and seldom change significantly. Prices do fluctuate often and may change by a large amount for many other products. For those items it is profitable to predict and buy when the prices will be low and postpone purchases when they will be high.

In order to reap the cost benefits of the lower prices and avoid the higher prices, inventories must be adjusted so that they are raised when prices are low and lowered when prices are relatively high. Inventory management must agree to adjust the level based on the prediction from the buyer. This is only likely when marketing and scheduling are also in agreement.

Raw material commodities are excellent candidates for price predictions since they usually have well established markets with available historical price data. Government price indexes and the commodity exchange data provide the information needed to forecast prices.

Graphing the data will show cycles and trends. Certain items exhibit seasonal changes. A typical example would be fruit; prices decline during peak harvesting seasons and rise during off seasons. The buyer must be ready to revise predictions because of unforeseen changes in the market. To carry the preceding example further, it would be necessary to change the prediction because of a drought, freezing weather, or extra heavy rain.

In addition, prices associated with products from overseas are vulnerable to political turmoil. Price movements are also affected by competitive products entering or leaving the market.