GM Using Metals Price Indexes to Share Costs?

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Sourcing Strategies

Monday we covered a topic near and dear to many sourcing professionals, the efficacy of the blanket purchase order. At issue, how rising metals costs can be shared across the extended supply chain. The automotive OEM’s and Tier 1 suppliers have essentially gone after (legally) suppliers for trying to pass off cost increases. So it was with great interest that a colleague tipped me off to an article on using price indexes to help share the pain.

We have long (well, as long as we have had this blog) touted the benefits of using indexes to benchmark metals pricing and to tie contracts to those indexes. The fact that GM appears to be acknowledging that the costs will have to be shared (rather than borne by the suppliers) is a great first step. We can’t help but think GM’s legal counsel may have suggested this alternative strategy. Putting suppliers out of business can’t possibly work for the long term.

And by the way we can’t help but mention that we’ll be launching an industrial metals pricing index in September.

–Lisa Reisman

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