20 January 2011 | Lindsay Clark
A little more than half of buyers are planning for price increases during 2011, the latest SM100 survey has revealed.
Faced with surging prices of key commodities, including oil, copper and food ingredients, 53 per cent of buyers were planning for proliferating costs this year according to the poll.
Meanwhile, 44 per cent said they were
not planning for price rises and 3 per cent were unsure.
Anthony Ayre, senior buyer at CE Electric UK, said: “As a basic business requirement, suppliers will continue to increase their prices in order to increase cash flow and minimise the impact of banks increasing
the cost of borrowing. The regional effect will be minimal, the worldwide effect will be greater.”
Local demand was no longer a major factor in supplier pricing, he said.
“The world is a global marketplace and as we manufacture less and less, we will become reliant on more and more imports.”
One buyer, who asked not to be named, said: “Yes, we are a distributor so all the buy-price increases that we receive are passed on. We do expect prices to continue to rise as we buy plastics and metals that fluctuate in the markets. We absorb these rises up to a certain point then the retail price has to be increased when we can no longer sustain them.”
Bob Lavery, procurement manager at the University of Leeds feared that the VAT rise, which was introduced at the beginning of the year, could become a smokescreen for hiding other price rises.
Although firms have the right to boost prices if necessary, most UK organisations realise that escalating costs will have an adverse affect on their clients, said consultant Alex Strange.
“I can’t understand why an organisation will not try to keep costs down so that they can keep the customers’ purchases. Close liaison with the suppliers and buyers should ensure that costs are maintained and not increased, where both organisations work to ensure that their customers remain with them.
“Buyers and suppliers should work together to ensure that they both exist and do not go bankrupt. This means trust by both in the relationship to ensure future success for them both,” Strange said.
One buyer explained that greater procurement activity, a focus on best practice to maintain control over spend
and an added focus on contract performance was helping to manage increasing prices.
☛ See news focus: Buyers face perfect storm