CASE STUDY

Effective Price Forecasting for Silicone Raw Material

Nov 18, 2016

Business Challenge: Difficulties with accurate monitoring and forecasting of commodity prices

A leading chemicals manufacturer was facing issues with their current price setting and forecasting mechanism, and wanted to develop a tool that could help them achieve improvement in the process.

 Situation: Current mechanism not robust enough to provide accurate results

The client was following a price setting method based on supply and demand shifts in the market, which was not robust enough. Hence, they wanted to build a model that could proactively scan market indicators and variables for price forecasting.

 Approach: Systematic approach to determine key factors, followed by building the price equation

We identified variables affecting market prices and conducted factor analysis to determine factors having high correlation with silicones. The identified factors were used to develop the price equation. We validated the price equation through primary research with buyers and industry experts.

 Impact:
The client was able to use our price forecasting dashboard to obtain real-time prices and obtain forecast for 12 month period. The model also allowed them to identify key drivers with maximum impact on the prices of Silicone. Access to real-time, accurate price information helped client with better procurement decision making.

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