Executive Briefings

Structured Contracts Can Help You and Your Suppliers Deal with Uncertainties

How can businesses deal with the uncertainties that they face in 2012? For one, they might consider structured contracts with range forecasts. These provide a way to communicate to suppliers the level of uncertainty in the forecast being provided and for the buyer and supplier to agree on a price for upside and downside flexibility. These contracts are a valuable tool when forecast accuracies are highly uncertain.

In Sourcing in Times of Uncertainty, ChainLink Research  enumerated eight ideas on how to ensure supply in unpredictable times. For example, acquiring deeper commodity market knowledge helps a company deal with commodity price volatility. Third-party sources of commodity-related information help, but sometimes critical pieces of information can only be found "over a beer" with suppliers. Supplier-specific information needs to be combined with relevant macro-economic data; demand, competitive and political information; and analyzed skillfully, in order to draw the right conclusions and make smarter sourcing decisions.

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How can businesses deal with the uncertainties that they face in 2012? For one, they might consider structured contracts with range forecasts. These provide a way to communicate to suppliers the level of uncertainty in the forecast being provided and for the buyer and supplier to agree on a price for upside and downside flexibility. These contracts are a valuable tool when forecast accuracies are highly uncertain.

In Sourcing in Times of Uncertainty, ChainLink Research  enumerated eight ideas on how to ensure supply in unpredictable times. For example, acquiring deeper commodity market knowledge helps a company deal with commodity price volatility. Third-party sources of commodity-related information help, but sometimes critical pieces of information can only be found "over a beer" with suppliers. Supplier-specific information needs to be combined with relevant macro-economic data; demand, competitive and political information; and analyzed skillfully, in order to draw the right conclusions and make smarter sourcing decisions.

Read Full Article