ProPurchaser has literally hundreds of data sources to draw upon when determining the numbers that appear on our monthly charts. We continually consult 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” whom we retain. These individuals and companies have in-depth knowledge about transaction prices in particular commodity areas (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” (15% of our database); and “hard-to-know” (85%). “Easy-to-know” data come from reputable commodity exchanges (such as: NYBOT, LME, CBOT, etc.). This information is readily available and accurate, reflecting actual transaction prices between willing buyers and sellers.
“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 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 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, don’t believe them. Every deal is different (quantity, quality, freight, etc.). In addition, true “transaction prices” are often deliberately obscured by volume rebates, secret discounts, scrap allowances, etc., many of which do not show up on invoices. As a result, a high degree of pricing accuracy is simply not possible.
However, we always get the direction right. Propurchaser data is highly accurate when it comes to the direction of the pricing (up or down), as well as the magnitude of change (e.g. down 2% or 10 %).
Fortunately, direction is what counts when negotiating pricing with suppliers. Simply knowing a supplier’s costs have fallen is usually enough to re-open negotiations.