Director's Cut: Innovate to Survive
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Director's Cut: Arm Yourself With Pricing Intelligence
Read today's blog from Director of Economics Jackie Greene on how to protect yourself when creating multi-year contracts!
Jackie Greene
Jun 26, 2019
What do you do to protect yourself when you create multi-year contracts? Just locking in your home fueling costs can feel like a gamble, and multi-year contracts look much further out than next season.
Looking at the US Consumer Price Index or the US Producer Price Index can be a good starting point when you're building pricing into your contracts or long-term plans. However, it only scratches the surface. The May 2019 US Producer Price Index (latest data available) was up 1.0% from May 2018. If we look at a sample of different sectors, however, we will see variations in pricing:
| Hogs | 29.0% |
| Concrete Ingredients | 3.5% |
| Metalworking Machinery and Equipment | 2.5% |
| Inorganic Chemicals | 2.0% |
| Materials and Components for Construction | 1.7% |
| Motor Vehicle Parts | 0.6% |
| Fuels and Related Products | -5.3% |
When setting up your contracts, look to tie pricing to benchmarks that are more specific than the overall US Producer Price Index. Beyond using the monthly numbers, we can help you see further into the future through our forecasting methodology.
Another advantage of using specific Producer Price information: It helps you justify price increases to your customers.
There is a lot that goes into your long-term plans. Reduce your risks by increasing the information at your disposal. We can help you find a PPI that works for your business. Contact us with a brief description of your company and include your contact information, and we will, at no charge, suggest a PPI for your use.
Jackie Greene
Director of Economics