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  • #987231
    Hushy
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    Hey all..

    I’m just trying to work something out. All my suppliers have prices rises in April if they haven’t done it already some small some significant, But when questioning the rise they all state “Due to the dollar” or the exchange rate etc.. I’m all for a yearly increase in price if that’s what people need to do to sustain their business but whats with the trend of blaming the the USD..

    The reason I ask is I just don’t really get it, and I’m hoping to be pointed towards some e-books or articles on the subject.

    Obviously I understand China etc run on the USD but when for 6 month of the year it $1.20 and the other 6 months at $0.90cents how does that justify a price rise due to the dollar..

    Sorry if this sounds really stupid.

    Cheers

    #1161733
    Greg Mawer
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    Hushy, post: 186897 wrote:
    Hey all..

    I’m just trying to work something out. All my suppliers have prices rises in April if they haven’t done it already some small some significant, But when questioning the rise they all state “Due to the dollar” or the exchange rate etc.. I’m all for a yearly increase in price if that’s what people need to do to sustain their business but whats with the trend of blaming the the USD..

    The reason I ask is I just don’t really get it, and I’m hoping to be pointed towards some e-books or articles on the subject.

    Obviously I understand China etc run on the USD but when for 6 month of the year it $1.20 and the other 6 months at $0.90cents how does that justify a price rise due to the dollar..

    Sorry if this sounds really stupid.

    Cheers

    Hi Hushy,

    No question that assists you in improving or growing your business is ever stupid.

    Plenty of companies use reasons that may be true/partially true/not true to justify price increases.

    Whenever the price rises on an input into your business it is always prudent to see if you can be supplied the same quality input at a lower price and see if your clients are willing and able to accept a price increase. It is the eternal balancing act of most people in business.

    Depending upon the size of your business, could could ask to receive invoices in the foreign currency (E.g. USD). This way you can see what the increase is excluding foreign currency movements. You could also arrange with your bank for foreign currency forward/option contacts to lock in the exchange rate and reduce the variance in your inputs. I have included a link to ANZ below (not to directly recommend ANZ, but as an information resource):

    http://www.anz.com/business/investment_banking/global_foreign_exchange/gfe_foreignexrisk.asp

    Hope this helps – please message me if you have any further questions.

    Regards,

    #1161734
    Tony Manto
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    Hi Husky, I think the just do that as a reason and there is no real collation. There might be, when the dollar goes up but they never go down when the dollar goes down.

    I would simply state:: “Dear valued customer or(name) would be better… due to the rising cost of doing business, I have no alternative but to submit a price adjustment. We hope you value our business and appreciate your on going support.”

    #1161735
    Johny
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    whats with the trend of blaming the the USD..

    Its the easiest.

    Obviously I understand China etc run on the USD but when for 6 month of the year it $1.20 and the other 6 months at $0.90cents how does that justify a price rise due to the dollar..

    Just to clarify, that’s not quite correct.

    China runs on RMB. The vast majority of manufacturers (larger ones who import raw materials directly from o/s are different), pay for their goods in RMB. We get many a quote in RMB and then have to convert to USD ourselves for our quote to our customer.

    When they deal with a buyer they have to convert from RMB To USD, and the buyer needs to then convert to their local currency, if they don’t have USD dollar accounts. So in most cases, there are two exchanges involved. And certainly currently the RMB has reduced a lot against the USD, although that shouldn’t have come through in pricing for stock already held I wouldn’t have thought.

    Generally when it is so volatile like now, factories are more likely to state in their information that prices are subject to change if the rate reaches a certain point.

    But manufacturing is also seasonal. You will find that many goods have price increase after major holidays, so for example after Chinese New year (Jan/Feb) they may rise, which may be a clue to the reason prices rise for you in April.

    Or for example in June – October, when Christmas production is underway. Demand for some products and materials can be so strong it affects prices. For example we have previously had product made with down (feathers) for the northern hemisphere winter season. Everyone else is doing the same making the raw material more scarce and therefore more costly. That price rise can be significant.

    So if someone in Australia wants something made in down at that time, they have to cop that increase as well.

    So my understanding is that the USD is only part of the equation, but its the easiest part to talk about.

    #1161736
    Stuart B
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    I don’t want to sound harsh but why does it matter? Are you wanting to give a rebuttle and prove why their prices aren’t rising or are you just curious?

    If it’s the former than personally I wouldn’t worry about it. Their prices go up, yours go up, or you find alternate suppliers who are cheaper.

    #1161737
    Johny
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    • Total posts: 840
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    If it’s the former than personally I wouldn’t worry about it. Their prices go up, yours go up, or you find alternate suppliers who are cheaper.

    I won’t propose to answer for the original poster here, but I would have thought that a part of business is to understand how pricing affects your costs.

    Changing suppliers can be a big pain, and if just changing your buying habits by say, ordering your supply a month earlier can save you some money, then isn’t that worthwhile?

    As an example, I am currently pushing my customers who buy Christmas related stuff to start looking to order very soon, because I know that in the next couple of months everyone else will be doing the same, and then they run the risk of not only price increases, but not getting their goods made in time, which sometimes results in them having the air freight those goods, which in turn costs them a lot more.

    So for me personally, I think understanding it, or at least generally knowing how and why costs change is very important.

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