We have literally hundreds of data sources to draw upon when determining the numbers that appear on our monthly charts. We spend thousands of dollars each year on selected trade journals and pay-for-use websites; as well, our researchers constantly scan newspapers, magazines, websites, and annual reports for cost-related information. Most importantly, we have a network of Deep Experts with whom we regularly consult. Each of these individuals has in-depth knowledge about transaction prices in a particular commodity area (e.g. wood products, plastics, chemicals, scrap, energy, etc.).
At the end of each month, we assemble and analyze data from all these sources to arrive at the figures we show on Propurchaser graphs. There are two classes of data we report on: easy-to-know (25% of our database); and hard-to-know (75%). Easy-to-know data come from reputable commodity exchanges (such as: NYBOT, LME, CBOT, etc.). This information is easy to find, transparent, and very precise because it reflects the actual prices at which willing buyers and sellers are transacting.
Hard-to-know data are gleaned from many sources, and require analysis and judgment to become meaningful. Individual information sources often disagree. As a result, we always draw data from multiple sources. At the end of each month, we compare what these different sources report and then reconcile major differences (often with the help of our Deep Experts). This process results in Propurchaser estimates of actual transaction prices, which appear on our graphs.
One word of caution about hard-to-know data: they are never absolutely correct.
If anyone claims to know the actual price of, say, steel, or chlorine, or paper, or any other hard-to-know commodity, dont believe them! Every deal is different and true transaction prices are often deliberately obscured by volume rebates, secret discounts, scrap allowances, etc., many of which do not even show up on invoices. These practices mean a high degree of accuracy is not possible.
Propurchaser data is highly accurate, however, with respect to the direction of the pricing (i.e. up or down?), and also the magnitude of changes (down 2% or 10 %?).
Fortunately, Purchasers usually do not need precise information to go after savings: Simply knowing a suppliers costs have fallen is enough to re-open negotiations.
To read more about why Direction is so important, follow the link below for a Negotiating Nugget © on this subject: