Negotiation opportunities on the rise
Overall, conditions in the Plant Engineering Factory equipment and tools price and cost indexes were unchanged from June to September. In the 12-mo period ending September 1999, the prices index rose 0.9% while the cost to manufacture fell 1%. Opportunities to argue for lower prices abound.
By Staff -- Plant Engineering, 12/1/1999
Factory managers who are buying equipment and tools have some great negotiation opportunities now. For example, consider the speed changers, drives, and gears industry. Suppliers in SIC 3566 have a habit of hiking prices in the fourth quarter. In the last 4 yr, these increases have gone well beyond the amount required to offset the effects of higher manufacturing costs. Based on the most recently available data, a 2% price hike from October to January is not out of the question.But such a hike should be easy for buyers to challenge. Data shows that manufacturing costs are up just 1.34% since September 1998. The astute buyer can fight a proposed price hike with a two-pronged attack. First, use weak demand as a weapon. For the year ending in September, U.S. end markets for SIC 3566's products are estimated to have contracted by 0.71%. Second, use a cost savings argument that focuses on domestic raw materials. Although labor rates in SIC 3566 are up 6.56% since September 1998, costs associated with U.S. made raw materials are down 1.37%.
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