January 27, 2023

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4 ways to negotiate in the face of soaring commodity prices



Quotes lapsed after a few days. This is the consequence of the increase in the prices of raw materials for IBF, manufacturer of machined parts in the Loire. “Steel was at 90 cents per kilo a year ago, we are at 1.90 cents at the start of September. And for stainless steel, we went from 3.50 to 5.06 ”, explains buyer José Abeijon. “It goes up so quickly that we have to three-day validity clauses, but our clients have decision-making processes lasting several months. “

# 1. Bargain to split into three

In order not to lose markets, IBF – 16 employees and 2 million euros in turnover – try to distribute the additional costs. The company is cutting back on its margins, asking the customer to make an effort of 20% at most in price deferral and discussing again with its suppliers. “They sell us at the market price of the day products that they have sometimes had in stock for several months, bought at a lower price. So there is room for maneuver, ”points out José Abeijon. “Currently, I spend my days negotiating discounts. “

# 2. Expand quotes

The SME sometimes tries to project prices to several months. It anticipates the increases so as not to have to raise its prices subsequently. “But the risk is to appear too expensive and no longer to be competitive, and to miss contracts even if we explain that we will readjust if we have overvalued. “

# 3. Buy abroad

Steel and stainless steel are cheaper in Spain and Italy, although prices are rising there too. Is it a fallback solution? But only for big order, because of the extra logistics cost. “Transportation can cost us more than the savings if we don’t fill a truck. »Thanks to this subterfuge, IBF was recently able to take a market of 30 tons of parts, at 1.20 centime per kilo of steel. “We would not have succeeded at the French price. “

# 4. Store: a bad solution

Getting ahead of the price by stocking is “too dangerous” because no order is like the previous one. “In thicknesses, formats, dimensions, we never need the same thing. »IBF still has on its hands a lot of surplus metal immobilized since 2008. The SME thought well about stocking raw sheets, the only way to consider the thing, but that required investments in cutting machines. “We cost the project and gave up. The manufacturer has little hope that prices will stabilize soon. “But, despite the increasing delays, we avoid the worst as long as there is no shortage,” concludes José Abeijon.