How Procurement Is Affected By Economic News

What Do Economics Have To Do With Procurement?

PurchTips Edition #397

There have been a lot of economic stories in the news of late. Procurement professionals like you should not ignore these, as many of them impact your work. Here are three economic matters to which you should pay particular attention:

Tariffs – Tariffs are hot conversation items in both the procurement world and the world in general. This month, US President Donald Trump announced tariffs of 25% on steel imports and 10% on aluminum imports. This means that US buyers will now pay significantly higher prices on steel purchased from international suppliers and should reconsider purchasing from domestic suppliers. It also means that other countries may implement retaliatory measures, making US imports into their countries more expensive for procurement professionals there. This is likely to be a rapidly evolving issue and procurement professionals who buy internationally really need to keep on top of changes to ensure that their organizations do not overpay for imported goods and services.

Interest Rates – Some countries who deploy similar monetary policies use interest rates to influence the inflation rate. For example, last week, the US Federal Reserve announced an increase in its federal funds rate. The wider effect includes banking interest rates rising for loans, the slowing of torrid economic growth, and the stabilization of inflation. As such, procurement professionals should keep that in mind as suppliers attempt to push through price increases. With macroeconomic inflation kept low, individual suppliers’ price increases – even small ones – should be scrutinized.

Sanctions – While tariffs affect the cost of buying from suppliers in other countries, sanctions can serve to prevent you from buying from suppliers in certain countries period. As relationships between countries are in a period of change, some sanctions may be lifted from certain countries while sanctions may be newly placed on other countries. Stay on top of the changes and be especially sure to discontinue doing business with any newly sanctioned countries.

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Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3