Inflation has hit the market hard. The pandemic is the primary cause of this and naturally, the procurement sector has suffered much to the effect. But that said, panicking is not the key. Procurement industry veterans have much experience witnessing volatility and pricing instabilities. Inflation is not new to them. However, the new entries may worry a lot considering the scenario. Since they have not experienced such scenarios earlier, it's not a pure cakewalk for them.
The pressure of inflation is building. But that said, supplier auditors with strong industrial experience are hoping that the situation is not extended for long. When will the supplies and demand normalize, only time will tell! Getting caught up in hysteria is not the solution. Do keep this in mind. Also, allowing suppliers to blame inflation as the sole cause of price increase will be foolishness.
Negotiation is necessary but then again, panicking should be avoided. You need to stay focused on the objectives and move on, accordingly.
Focusing On The Economics
It is necessary to focus on economics. This will allow you to have a better understanding of the business drivers along with the scenario of the suppliers. It is also essential to examine the long and short-term market trends concerning your commodities. Unless you have a clear understanding of the situation, the negation with the suppliers will never be fruitful. You can hire supplier auditors to manage proceedings. These professionals always eye towards commodities that are on the verge of rising in the economy.
Stay Away From The Hype
Hype can be infectious. You need to stay away from the hype. You must not have an approach like, "well, everyone is saying the price will rise, and hence, that's true". Stay away from such hysterias. Always try resisting the blanket statements from the suppliers and then carry out negotiation based on facts and real business scenarios.
Managing The Volatility
Short supply terms may have higher price tags. However, such volatile situations will be expected not to sustain. Said that, if the cost includes sale pricing, the renegotiation part will be minimal once the price drops! Therefore, it is necessary to identify commodities that have been marked "volatile". Accordingly, separate it from the total purchase cost and then negotiate the surcharge. The supplier auditors may manage the procedure with more expertise.
Final Words
You need to focus on your negotiation skills and approach the scenario. Don't get nervous about the present inflation scenario. Losing sight of the big picture is not the key. Inflationary pressures will be there, but you need to stick to your core ideas. You also need to negotiate with the suppliers depending on the overall performance. Remember, the circumstances will keep changing but the jobs and responsibilities remain the same. The pandemic situation will be over after a period. We have to stay united and move on. Play the cards right, manage the negotiation part, and never panic. Good days are on their way to make things better.
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