How are you responding to supplier price increases?

Manufacturing companies are currently facing several challenges, including raw material price increases, volatile customer demand, limited supply or even shortages, supply chain instability, increasing cost-to-serve, just to name a few. There are so many issues and challenges to deal with. You deal with one issue and ten more crop up! It’s firefighting on all fronts.

What do you do about this price increase from your key supplier? Your options are:

1.      Pass on the full increase to your customers

2.      Partially pass on the increase to your customers and partially absorb the increase

3.      Fully absorb the increase yourself

4. Negotiate with your supplier

Which option are you choosing? For quite some time now many businesses have been defaulting to option 3 and fully absorbing supplier price increases. Businesses are worried about their customers’ reaction, competitor actions and losing business if they increase their prices. There is just so much UNCERTAINTY.

They have been SQUEEZING their own MARGINS and now they are in a situation whereby a very significant price increase is required to stop the margin erosion and to return to margin levels from even a year ago.

There are businesses that have NEVER increased their prices. Not during the pandemic when raw material costs are increasing and not once since they’ve been in business.

They are looking at +20% price increase at least. It’s not impossible.

ACTION is required and the time has come to RETHINK their #pricing approach. Businesses have started to proactively respond to their pricing challenges.

Have you?