Navigating Price Volatility in Chemical and Direct Material Sourcing

One of the most persistent challenges procurement professionals face when sourcing chemicals or direct materials is dealing with price volatility. From fluctuating raw material costs to sudden supply chain disruptions, price swings can disrupt budgets and complicate long-term planning.

This is where Coupa Sourcing Optimization (CSO) becomes a powerful ally. CSO doesn’t predict market shifts, but its ability to quickly launch sourcing events and analyze bids allows procurement teams to regularly check pricing and supplier capacity. With this speed, buyers can respond to price changes more frequently, ensuring they’re not locked into unfavorable terms as markets fluctuate.

Strategic Sourcing on a Sourcing Calendar

Traditionally, CSO is used for large-scale, complex sourcing events that align with a company's annual sourcing calendar. Think about strategic tenders for logistics, packaging, or other high-value categories where the complexity requires advanced scenario-based analysis. These are typically planned months in advance, with significant time allocated for evaluating various award scenarios, balancing costs, supplier risk, and operational requirements.

For example, annual tenders for global logistics might involve evaluating multiple carriers across regions, factoring in costs, delivery times, capacity, and compliance with environmental standards. Similarly, large-scale packaging events may involve comparing materials, suppliers, and distribution networks while adhering to specific sustainability goals.

Equally At Home in Volatile Markets

However, CSO’s strength goes beyond these traditional, planned sourcing events. Due to its endless possibilities in terms of configuration and the ability to run rapid sourcing events, CSO is equally powerful in more dynamic, volatile markets such as chemical and direct material sourcing. In these markets, where prices and availability can shift dramatically, procurement teams need to be quick on their feet, and CSO delivers the speed and flexibility required.

Real-World Use Case: Pharmaceutical API Sourcing

Take the example of a pharmaceutical company sourcing Active Pharmaceutical Ingredients (APIs)—a critical component for its products. API prices are notoriously volatile, often changing on a weekly basis due to shifts in raw material availability, geopolitical tensions, and fluctuations in global demand. The company also has multiple production sites, each with varying needs for APIs depending on their output schedules and product lines.

Using Coupa Sourcing Optimization, this company can go to market weekly, gathering up-to-date pricing, supplier capacity, and both qualitative and quantitative factors, such as supplier reliability, regulatory compliance, and transportation constraints. CSO’s scenario-based modeling enables the procurement team to rapidly compare bids, optimize supplier allocations, and choose the best mix of suppliers for the week, all while adhering to production schedules and ensuring supply continuity.

Not only does CSO help the company make faster, data-driven sourcing decisions, but it also automates the creation of detailed reports. These reports provide insights on supplier performance, pricing trends, and contract compliance, and can be automatically pushed into other systems—such as ERP platforms or production planning tools—that rely on the sourcing event outcomes. This seamless integration allows the procurement team to focus on strategic decision-making rather than manual data entry, speeding up the entire procurement cycle.

With the ability to quickly respond to weekly price shifts and make optimal sourcing decisions based on comprehensive data, CSO turns volatile markets into manageable opportunities.

Conclusion

With Coupa Sourcing Optimization, handling price volatility becomes less of a reactive challenge and more of a proactive strategy. Whether it's through frequent, agile sourcing events in dynamic markets or annual, complex tenders in more stable environments, CSO empowers buyers to make smarter, data-driven decisions. The result? Optimized sourcing outcomes that not only save money but also align with broader corporate strategies, driving margin improvements across the board.