CASE STUDY

Addressing Volatile Commodity Prices for a Steel Company by Conducting Price Benchmarking Study

Mar 27, 2020

Global Steel Market Overview

Prices for commodities in the global steel market are fueled by several factors including trade disputes, reduction in steel capacity and environmental disasters occurring during a year. Steel companies must anticipate turbulence in the global steel market and analyze factors resulting in price fluctuations. They must assess risks that can drive down prices and threaten the stability of the steel market. This case study is a classic example of how SpendEdge helped a steel company address volatile commodity prices and capitalize on positive commodity price changes.

Business Challenges Faced

The client, a leading steel company headquartered in the US was facing challenging business conditions and volatile commodity prices, thereby, compelling them to deliver high cost savings. They were looking to gain commodity insights to make inform pricing negotiation discussions with suppliers in high-spend categories while reducing costs and improving contract terms. The company, therefore, decided to collaborate with SpendEdge to leverage its price benchmarking services.

Addressing volatile commodity prices is crucial for companies to reduce costs and contract terms. Request a proposal to access our price benchmarking solutions for FREE now!

Our Research Approach

To help the client address volatile commodity prices, the experts at SpendEdge mapped the current costs of the company’s various commodities against underlying price indexes. They conducted a detailed price benchmarking study and provided insights into market rates and trends. Also, the experts analyzed market dynamics, price movements, availability of alternative suppliers and products, financial performance, and forex rates to provide insights into various cost drivers and visibility of the commodity landscape.

The insights provided to tackle volatile commodity prices helped the client to present fact-based arguments during pricing negotiations. The experts identified key demand-based and commercial negotiation levers and enabled the client to make informed supplier negotiation discussions. The solutions offered helped the client to better understand the fundamentals of the commodities.

Wondering how you can analyze different cost drivers and gain pricing insights? Reach out to our experts for customized solutions.     

Engagement Outcome   

Conducting a price benchmarking study not only helped the client to address volatile commodity prices, but it also enabled the client to capitalize on positive commodity price changes and mitigate negative changes. The recommended negotiation levers resulted in savings worth £2 million (10% of spend) across its key commodity suppliers. Tracking key commodities regularly, and on a long-term basis helped the client make better sourcing decisions and supplier management going forward.

Conducting a comprehensive price benchmarking study is imperative to tackle volatility prices. Subscribe now to enjoy free access to our web-based platform for better insights.

Effective Ways to Address Volatile Commodity Prices

1. Develop a comprehensive understanding of the underlying cost and price drivers of the full breadth of commodities sourced globally.

2. Consider trade-offs involved in buying decisions and evaluate if risks tied to more uncertain commodity prices are worth the received discount.

3. Develop contracts that assign these risks more equitably between buyer and supplier.

To know how you can address volatile commodity prices, request more information from our analysts.

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