Best Price Data Yields Best Savings from EU-Sourced Chemicals
by Brian J. McCormick, guest columnist
This is not another April Fool’s story.
Finding what we at Chemcost Interactive* call “The New Cheap” – the markets that offer the lowest prices for chemicals commodities – takes digging into the data on global buying and selling (Datamyne is a primary source for us) and then not merely calculating the going rates, but running down the best prices obtained in trade, no matter where.
Contrast the size of the savings opportunities when we do best price data analysis of EU trade for the 10 commodities that make up the Datamyne US Best Price Benchmark monthly index (Chart 1) versus a savings analysis based on average prices (Chart 2).
A few caveats on the data underlying the charts: To achieve apples-to-apples comparisons, Chemcost relied on 2013 data on US and EU trade from Datamyne. (Eurostat data is released a month later than US Census data.) Note that the EU trade data includes intra-EU trade.
Clearly, identifying the best prices across diverse markets provides the best view of potential savings. In Chart 1, best-price analysis yields an average 52% cost savings opportunity for the bucket of 10 benchmark chemicals when purchased from the EU. Only ethylene can be had for a better price if sourced from the US.
In Chart 2, we see the reference point changed to average price, and find EU sourcing offers a 19% average cost savings opportunity for four commodities and an average 50% cost UPCHARGE HURT for six of the 10 in our bucket of chemicals.
Now, it must be acknowledged that actually getting the best prices identified in Chart 1 will depend to a very great extent on the scale of your purchasing – with savings prizes of this size beyond the bargaining clout of all but the largest customers.
Indeed, for small- to middle-scale customers, these charts may serve best as an illustration of the need to strategically survey multiple markets for pricing information that can be used in arbitrage or as leverage in negotiations.
Next month: “Where is the new cheap for …. the World?”
Chemcost Interactive LLC© 2014
About Brian J. McCormick
Brian J. McCormick was instrumental in developing procurement costing and quality assurance for P&G over a 34-year career. He is the founder and managing director of Chemcost Interactive* LLC (CI), a company offering research and analysis to support cost-efficient supply chain management.
Chemcost can assist Datamyne’s customers in identifying lower price opportunities through consulting and training. Chemcost also offers annual subscriptions to global and regional price bulletins on 225 commodities across 8 major chemical spend classes. Feel free to contact Chemcost for more information at www.chemcostinteractive.com
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
* Chemcost Interactive is a trademark of Chemcost Interactive LLC
Date posted: April 11, 2014