Enterprises need to understand the essence of pricing mechanism and optimise procurement process

SUZHOU, Dec 3 (SMM) – Enterprises can better manage their procurement process with thorough understanding of the pricing mechanism and the strategic significance, according to Yettie Yi, Business Director of SMM Consulting.

Yi was sharing her insights at the  2020 Nonferrous Metals Industry Chain Annual Conference in Suzhou, sharing the essence of pricing and optimizing procurement operations, as well as introducing the SMM price forecast and procurement strategy service to local and overseas delegates.

“The core issue faced by end-user enterprises in procurement is how to formulate strategies in order to stabilise and control costs as well as the cooperation with other departments,” said Yi. Comprehensive factors need to be taken into consideration when formulating procurement strategies, including the order types and risks. The procurement teams are also supposed to be well organized and trained with relative skills.

Yi also highlighted that the prediction and the analysis of fundamentals and market sentiment are crucial for formulating procurement strategies.

Single NASDAQ composite index vs SHFE non-ferrous metals index

source: SMM

“By interpreting the macroeconomics and analyzing market fundamentals, companies can deeply understand the mechanism of price fluctuations and make accurate predictions.” She said that it will help the companies to “take advantage of the advanced signals and effectively avoid excessive interference of funds”.

According to Yi, SMM has a well-built system to help enterprises optimise their procurement management.

As for the pricing mechanism, the SMM online price system is established on key influencing factors including the real trading commodities, market supply and demand, Nash equilibrium, currency value, government policies, cyclical economic fluctuation, and market sentiment. The system has ruled out the disruptive factors, such as the information asymmetry and speculative excesses. Over 200,000 large enterprises are using SMM online price settlement for its reliability.

Yi also explained that in terms of the customized assist on procurement process, SMM will go through 4 steps to formulate the strategies.

Based on the SMM industry Research Database, SMM will first conduct in-depth research on the procurement model of benchmarking enterprises and evaluate the advantages and disadvantages. Then, a specific procurement mode will be diagnosed after an in-depth interview with the key team of the enterprise. After that, short-term and mid to long-term procurement strategies will be settled, and a series of follow up services will be available.

“Facing the core issues in procurement, the professionally formulated strategies are of great significance to help enterprises control budgets and avoid market risks,” Yi concluded.