The market conditions for many commodities (metals, chemicals, petroleum, transportation, etc.) change very frequently. All to often Purchasing only examines a market when going through the contracting process. This can lead to short term tactical solutions that do not minimize long term costs. A better solution is to evaluate the long term market conditions and plan accordingly. The following are examples of the questions answered in these analyses:

Is the market competitiveness increasing, stable, or decreasing?

Are potential suppliers emerging in new geographies?

Are supply and demand factors likely to increase or decrease prices?

Are the materials becoming more or less critical to our business?

The answers permit us to set a commodity sourcing strategy that includes:

Long term versus short term contracts.

Bidding or partnering to establish suppliers and form the contractual relationship.

Domestic versus global suppliers.

The need to identify alternative suppliers.

The need to create alternative products.