As the prices of commodities become more volatile due to shortages, an increasing number of manufacturers are redesigning their products or processes to combat price hikes.
A survey published today by EEF and RBS shows that nearly half of the respondents had overhauled their products or processes in response to price increases.
Other strategies implemented by manufacturers to combat the rises in commodity prices include new sourcing strategies and using cheaper, alternative materials to the usual ones, as well as renegotiating contracts, bulk purchasing and buying forward at fixed prices.
Perrin & Rowe manufactures luxury taps, and has three factories in the UK. Glenn Griffiths, supply chain manager at the company is updated via e-mail by its brass supplier on a daily basis, enabling him to buy forward when the price is low.
“Once the price gets close to our internal price, we tend to fix it for around three months at that price and buy forward – it’s like fixing your mortgage rate,” Griffiths explained.
Pointing to the shortages, Griffiths said that people are buying copper as if it were a precious commodity: “What people are doing increasingly these days is investing in copper, as you would invest in another precious metal like gold.”
David Ost, North West regional director of the EEF, said: “What is clear from our survey is that there is not a simple equation for managing rising and volatile materials costs. Manufacturers have so far deftly navigated the issue using the internal tools available and being agile in managing customer relations and procurement strategies.”
Peter Russell, head of manufacturing at RBS, said: “"Looking out to the next 12 months, the direction of commodity prices is very uncertain," he said. “But most manufacturers are building further price increases into their business plans," he added.
