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Saturday, December 24, 2005

Market Conditions and Bid History

I highly recommend and their wonderful market reports. In addition to the market data provided on their site, buyers can now access a number of excellent government sites. It's possible to get weekly updates on most perishable products. Daily quotes are available for the major markets.

Using the data to your advantage requires a simple comparison of current market conditions to supplier bids. A review of bid history will point out obvious red flag items: suppliers tend to react quickly to increases in costs at the market; suppliers tend to react slower to decreases in costs at the market; supplier salesmen tend to promote overstocked inventory items; supplier salesmen tend to promote higher margin alternatives. Careful scrutiny of bids in relation to the market prices will highlight opportunities during times of price volatility.

The best way to approach market price vs. bid price is to treat the market as a supplier. If you are inclined to work with spreadsheets, you can inflate the raw market prices with transportation and storage factors. Whether or not you use raw market costs or adjusted costs, the comparison will give you a negotiation advantage.

Before: "You're a bit high! Can't you do anything with your number?" Not too insightful.

After: "You are still quoting me the same as last week. The market corrected down 6% this week. Do you expect me to pay for your mistakes the previous week?"

Keeping a history of this activity is a great tool for vendor selection, budget forecasts and long term planning activities.

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