A subscriber to PurchTips today asked my opinions on how to deal with industry-wide price increases due to buying in an inflationary market. I thought that I’d post an excerpt here so that more than one person can benefit from my advice.

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My view is that purchasing should always challenge price hikes except when doing so will increase the risk to the continuity of supply.

I also feel that purchasing professionals need to have good forecasting skills to estimate where prices are going.

If increases are expected to continue, then locking in a long-term deal at today’s prices is a good idea.

However, if the purchasing professional feels that prices are peaking, the last thing one would want to do is lock in a long-term deal at today’s price. When prices peak and subsequently decline, a hand-to-mouth sourcing strategy works best until the prices bottom out at which time a long-term deal makes sense.

Respectfully,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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