A recent survey by McKinsey Quarterly (found here) says that nearly half of all respondents don’t expect their companies to raise prices over the next six months. The manufacturing sector was the one exception.
On the manufacturing side, nearly 90% have seen an increase in the cost of inputs. And only in the manufacturing sector, McKinsey says, did a majority of respondents say their companies had raised prices and will continue to do so in the next six months.
My takeaway: Now is not the time to shy away from price increases. Suppliers are eager to pass on their rising costs -distributors should strategically consider where they can compensate for the increases.
Consider what Profit Planning Group’s Al Bates told MDM in April: “What we see for example is that when you do have continual price increases, distributors reach a point where -for whatever reason -they feel they can’t pass a full 5% on, so they only pass on 3%. That’s a real danger. The fact that the supplier is raising prices is the best reason in the world to go to my customers and say, ‘This was not my idea! Suppliers did this to us again.'”
Read the interview with Bates, author of Profit Myths in Wholesale Distribution: The Truth About Sales, Margins, Inventory, and Expenses, by clicking here. The interview was published in the April 25, 2008, issue of Modern Distribution Management.
Comment below: How are you dealing with rising costs?
