Member Success Story: Formula-based pricing In addition to being a trusted resource for cost transparency, ProPurchaser is a large community of experienced procurement professionals with amazing real-world expertise. The following is a ProPurchaser Member Success Story: “A key (sole source) supplier wanted to change their contract with my company to a formula-based pricing model. The supplier provided their cost components as well as the formula they would be using. I was able to find (nearly) all of the cost input elements in ProPurchaser and built my own model to mirror the supplier’s, including resins, transportation/fuel and the Consumer Price Index (CPI). The supplier agreed to the model. “In the second year of the contract, the supplier approached me and requested a 10% price increase. I validated the increase request against my ProPurchaser-based model and saw that only a 1.5% increase was warranted. The supplier (who has considerable leverage because they are a sole source) and I agreed to a number far below the originally requested 10%. Overall it was a collaborative process, and the supplier has since ended their use of the formula-based pricing model, although I still use my should cost model to validate their prices.”
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