Managing Highly Volatile Raw Material Prices: MAUSER Provides New Alternatives for Price Adjustments
The turbulent ups and downs of raw material prices in the recent past have shown the effects of delayed price adjustment mechanisms for raw materials: They cause considerable disruptions in pricing for both producers and consumers.
MAUSER CEO Dr. Clemens Willée considers it important to increase the transparency and planning reliability for all parties: “We would like to improve the situation in a joint effort with our customers, offering new solutions that minimize the distortion effect both for increasing and for decreasing raw material prices.”
Against this backdrop, the MAUSER Group – supported by the renowned consulting company Simon-Kucher & Partners – has developed two different concepts designed to increase planning reliability for MAUSER and its customers. The two models are in line with pricing solutions that have already been implemented successfully in other industrial sectors.
Model I: Responding to the index at closer intervals
Most producers adjust HDPE prices monthly and steel prices quarterly to keep up with the changes in the indices. Synchronizing customer price adjustments to this same schedule eliminates the delay (“lag effect”) of highly volatile price developments for all parties involved. In order to keep the administrative effort down to a minimum, MAUSER is now approaching its customers to explore the opportunities for adapted software solutions (Auto Data Read-in). In practical terms, this means that MAUSER would make monthly price data available in a customer compatible format. This format would enable the customer’s IT to import the data electronically, allowing for automatic adjustments requiring no manual input of prices.
Model II: Debit/Credit System
The debit/credit system offers an interesting alternative to price adjustments at shorter intervals. This model involves setting prices for a period of 6 months on the basis of the current index. At the end of every month, the difference to the actual raw material price is determined. Depending on price developments, quarterly settlements are made by sending either an invoice or a credit note. The advantage of this model: The customer’s IT department can input prices for six months and there is no need to update price lists during this period. The administrative effort for the customer at the end of a quarter is practically identical to carrying out quarterly adjustments under the present system.
Alexander John, MAUSER Head of Global Sales & Marketing, considers conditions to be favorable for the introduction of either of the models: “Due to modified production capacities of manufacturers and the present economic situation, raw material prices are still highly volatile. The two alternative models can therefore result in immediate improvement.”
In the coming weeks, MAUSER will present these models in greater detail to all contract partners, exploring which adjustment approach will bring optimum results for them. In the meantime, some customers have already reacted and eliminated pricing thresholds in their contracts. For security reasons, the implementation of automatic IT system price up-loads still takes a little time. Customers have already indicated their willingness to change to shorter adjustment periods, once this hurdle has been overcome.
About MAUSER
MAUSER AG is a leading producer of industrial packaging with approx. 4,000 employees and revenues of around EUR 1 billion. Its largest business is plastic packaging, followed by steel, IBC and fiber packaging, reconditioning services and machinery for packaging production. MAUSER AG operates more than 50 locations in Europe, North America, South America, Latin America and Asia. Two marketing networks – one for plastic and one for the production of steel drums – include approximately 30 members in more than 20 countries and make MAUSER quality products and services available worldwide.
Contact:
MAUSER AG
Dubravka Duic
Schildgesstr. 71-163
50321 Brühl
Tel. +49-2232-78-1465
dubravka.duic@mausergroup.com
www.mausergroup.com
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