Indirect Materials Pricing Trends and Forecast (Part 4)

Please click here for Part 1, Part 2 and Part 3 of this series looking at indirect and MRO pricing trends.

For 2012, DSSI is forecasting the following price trends across the MRO category:

Abrasives: Flat
Chemicals: Increasing
Cutting Tools: Increasing
Electrical Components: Flat
Fluid Power: Flat
Hand Tools: Flat
Janitorial Supplies: Increasing
Lubes: Increasing
Office Supplies: Flat
Power Transmission: Flat
Safety Supplies: Flat

Of these categories, Spend Matters has seen examples of compression in 2012 across some of these flat categories from smart sourcing and supplier management strategies. But in general, it's our view that DSSI's MRO price observations for this year are quite accurate, grounded not only in rigorous category analysis, but recent price benchmarking with a wide range of suppliers.

What is the best means of driving savings in this current context? For one, DSSI recommends cross-company and multi-company spend aggregation. This is a model they pursue, as do others in some of these categories (e.g., Corporate United, Insight Sourcing Group, CoVest). In addition, they also suggest being a good customer in the form of directed supplier relationship management programs that focus on lowering cost of sales for suppliers as well as consistent and automated transaction processing.

Effective strategic sourcing and contract management are always in vogue -- including in the current environment. But here, DSSI calls out the importance of managing contract pricing at the item level and proactively conducting sourcing events to stay up-to-date on market sampling and benchmarking. "Corporate leverage and consistency" can help driving savings based on locations buying at the same price, lowest possible price point. And without question, the combination of SKU standardization and reduction combined with preferred pricing can play a key role in helping achieve the best possible pricing on frequently sourced items.

Spend Matters would like to thank DSSI for helping provide the MRO market intelligence not only for this series, but also for the indirect/MRO break-out section at Commodity EDGE.

- Jason Busch

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