Analyzing the Impact of a Vendor Cost Change
Naturally, when your vendors change their costs, this has a direct impact on your profitability. And while costs are more likely to increase than decrease, cost changes almost always present you with an opportunity to improve your gross profits.
Unfortunately, vendor cost changes can happen rapidly and many distributors are not prepared to take advantage of them or even analyze the impact of a cost change on their business. Analyzing a vendor cost change can mean sifting through mountains of data to find opportunities to negotiate with suppliers and customers.
Without the right software to conduct an analysis, many distributors lose gross profit during a vendor cost change instead of taking the opportunity to improve gross profits. epaCUBE’s Cost Optimizer looks compares cost changes to your sales history making the job of analysis easy so that your team can run any number of strategies to turn cost changes into opportunities for profit improvement.
For example, you might find opportunities to negotiate with your suppliers. Lets say a vendor announces an across the board cost increase for their products. Using epaCUBE’s Cost Optimizer, you might determine which items have the most impact on your bottom line and negotiate new terms on that smaller subset of products. Likewise, you’ll have information to better negotiate net into stock, special pricing agreements and rebates.
Alternatively, you might also find opportunities in your customer base for those same products. While communicating the across the board increase to your customers, you might also find that there are opportunities with particular products to negotiate better pricing or win new business based on the types of items that particular customer or customer group purchases from you.
Photo Credit: Steve Snodgrass