I’m excited to welcome an old cohort, Elizabeth Baatz to Supply Excellence. A true economist, Elizabeth was a regular contributor of pricing and supply indices and intelligence to Purchasing Magazine. Today, she and her husband, economic-whiz-kid Victor Malair, have created a proprietary forecasting model that uses multiple indicators to predict price and supply trends for numerous commodities and spend categories. Their pulse on supply markets — known as the ICE (Industry Cost Escalation) Alert — is used by hundreds of supply management teams to develop heding, sourcing, and supply management strategies.

Below, Elizabeth shares the first in what I hope will become a regular series on the top 10 commodities where supply managers can expect price increases in the coming months — and why. You can subscribe to the ICE Alert at www.ice-alert.com.

Negotiation hazard industries, which are under extreme margin pressure to raise prices, are numerous now. The table below shows the Top 10 manufacturing industries (excluding food and household products) which need significant price hikes in order to match the average margin conditions that were held over the past five years. More than 40 industries need a price hike of 10% or more! Another 86 need a price increase of at least 5%. (Note: margin analysis comes from ICE-Alert modeled data and are margins per $100 of product sold)

Here then are the Top 10 Negotiation Hazard Industries (excluding food and consumer products). This table answers the question: To restore margins to year-ago or five-year average levels, industry product prices have to increase by how much on average? Source: ICE-Alert (January 2007)   http://www.ice-alert.com/ 

Click to enlarge.)

To uncover negotiation hazards (and opportunities), at ICE-Alert we examine price trends relative to costs, which is how we are able to estimate industry margin conditions. The complete January edition of ICE-Alert will be released during the week of January 29.

Victor Maliar and I have been running a comprehensive and unique cost model for 400-plus U.S. manufacturing industries for more than 10 years. Results from the model are published in the ICE-Alert report (ICE = Industry Cost Escalation).

Our subscribers, to date, have generally been in the procurement/supply chain fields, but now with pressures to pass along cost hikes being so high, many sales, marketing and finance managers are looking to ICE-Alert to help justify much needed price increases. Of course, one purchaser’s hazard is a salesperson’s opportunity!

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