05 October 2006 | Paul Snell
Manufacturing buyers must expand their global view to counter rising commodity prices, according to recently published research.
A survey by Vendigital reveals there is increasing urgency for buyers to cut the rising cost of commodities.
Higher demand for basic commodities from emerging nations, and global insecurity due to events such as the Iraq and Afghanistan wars, have contributed to recent rises.
These costs have been passed on to purchasers buying parts and/or machinery.
Adrian Griffiths, director at procurement firm Vendigital, told SM one way to tackle rising prices was to source from low-cost countries, but that some buyers were not spreading their net for suppliers widely enough.
"Far too many people say they have a global understanding of the market by saying, 'we are in China'. But what about Argentina, Brazil, South Africa, Eastern Europe?
"Purchasers should always go out into the larger market. There are no longer just four suppliers to select from, but a potential 1,000 globally."
Of the 75 purchasing managers and directors quizzed, just over half said reducing costs was now their priority.
Griffiths said this was forcing purchasers to adopt a short-term strategy, to make quick cost reductions.
"The focus of procurement has moved away from the long term; people are looking for prices to come down now," he said.
Griffiths said another method of coping with rising prices was to work more closely with existing suppliers.
However, he said that should only happen once buyers were sure they had the best deal, and they should not be deterred by the possible risks of switching to unknown vendors.
When asked how easy it was to change suppliers, Griffiths said: "If you have good auditing, process-management and switching procedures, you shouldn't get burnt."
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