What are the best practices and tools for raw material price benchmarking and tracking?

1 Define your price benchmarks

The first step in benchmarking and tracking raw material prices is to define your price benchmarks, or the reference prices that you use to compare and evaluate your own costs and performance. Price benchmarks can be based on various sources, such as market indexes, historical data, contracts, competitors, or industry standards. However, you should choose your price benchmarks carefully, considering factors such as relevance, reliability, availability, frequency, and granularity. For example, you may want to use a market index that reflects the specific quality, grade, or location of your raw material, rather than a generic or average one. You may also want to use multiple price benchmarks to capture different perspectives and scenarios, such as spot prices, futures prices, or regional prices.

2 Collect and analyze price data

The next step in benchmarking and tracking raw material prices is to collect and analyze price data, or the information that you use to monitor and understand the movements and trends of your price benchmarks. Price data can be obtained from various sources, such as public databases, industry reports, trade publications, newsletters, websites, or subscription services. However, you should ensure that your price data is accurate, timely, consistent, and comprehensive. For example, you may want to verify the credibility and methodology of your data sources, update your data regularly, standardize your data formats and units, and include relevant variables and factors that affect your price benchmarks.

3 Use price tracking tools

The third step in benchmarking and tracking raw material prices is to use price tracking tools, or the software or applications that you use to store, organize, visualize, and communicate your price data and benchmarks. Price tracking tools can help you automate and streamline your data collection and analysis processes, as well as generate insights and reports that support your decision making. Price tracking tools can vary in terms of features, functions, and costs, depending on your needs and preferences. However, some common elements that you may want to look for in a price tracking tool are: ease of use, customization, integration, security, and scalability. For example, you may want to use a price tracking tool that allows you to create custom dashboards and alerts, integrate with your existing systems and platforms, protect your data privacy and integrity, and accommodate your growing data volume and complexity.

4 Compare and adjust your prices

The fourth step in benchmarking and tracking raw material prices is to compare and adjust your prices, or the actions that you take to align your own costs and performance with your price benchmarks and market conditions. Comparing and adjusting your prices can help you optimize your sourcing, budgeting, and forecasting strategies, as well as identify opportunities and risks for your business. Comparing and adjusting your prices can involve various steps, such as: evaluating your price gaps and variances, determining your price drivers and influencers, setting your price targets and objectives, negotiating your contracts and terms, and reviewing your results and feedback.

5 Monitor and anticipate price changes

The fifth step in benchmarking and tracking raw material prices is to monitor and anticipate price changes, or the activities that you do to keep track of and prepare for the fluctuations and trends of your price benchmarks and market conditions. Monitoring and anticipating price changes can help you adapt and respond to the changing dynamics and demands of your industry, as well as gain a competitive advantage over your rivals. Monitoring and anticipating price changes can involve various activities, such as: following the news and events that affect your raw material prices, conducting scenario analysis and sensitivity testing, updating your assumptions and forecasts, and implementing contingency plans and actions.

6 Learn and improve your practices

The sixth step in benchmarking and tracking raw material prices is to learn and improve your practices, or the processes that you follow to evaluate and enhance your methods and tools for benchmarking and tracking raw material prices. Learning and improving your practices can help you refine and update your price benchmarks and data sources, as well as improve your price tracking tools and skills. Learning and improving your practices can involve various processes, such as: collecting and analyzing feedback and data, identifying strengths and weaknesses, setting goals and metrics, implementing changes and improvements, and measuring outcomes and impacts.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?