Price Index Model
Procurement and supply chain professionals are always being asked ‘what have you done for us lately? How can procurement professionals measure their performance in terms of cost management when there are many variables, such as, fluctuating volumes, volatile markets, and exchange rates in play? Manufacturers can use the COGS and ROI ratios. We know what we paid last year and what we are paying this year for the goods we purchase. But when we are running a thousand SKUs how can we objectively assess supply management’s effect on the total cost structure – especially in public sector organizations where production costs are less of an issue?
A weighted price index model allows any organization to measure incremental price variations as an aggregate value over fiscal periods. Supply management can establish an in-house benchmark of cost performance and then correlate this to external indices and relative cost drivers over monthly, quarterly, or annual fiscal periods. By isolating the price variations in an index, we can follow trends to develop procurement strategies to effectively respond to market conditions and report out to senior management and operational groups in a strategic and objective manner. We can quantify the basis for our decisions.
The eSeminar will take you through the steps to build the model and apply it to your organization so that you can strategically manage costs and objectively demonstrate efficiencies.
- Review how to measure supply’s performance in terms of cost management
- Examine a model for measuring incremental price variations as an aggregate value
- Explore ways to objectively demonstrate efficiencies, both internally and externally
Contact us to schedule your in-house session.