As in most industries, suppliers attribute price increases to rising costs. When buyers have limited visibility into what is truly driving the price, it can be challenging to confirm the cause and justify the increase. If the real cost drivers remain unidentified, it can be even more difficult to negotiate lower prices. Using unbiased, third-party data and commentary can help better support your arguments. The Packaging Intelligence Center (PIC) combines objective RISI data into meaningful, actionable information, ensuring you have the best information at the negotiation table. PIC enables buyers to:
Use Price Indices
You can track and compare your paper price against objective benchmarks to understand if your price falls within the industry average. RISI price indices have a long and respected history in the industry. They are collected and reported using a transparent methodology refined over many years. Understanding how the process works gives our customers confidence to use our prices in a number of applications. In fact, many of our clients use our price indices as escalators and de-escalators in their contracts.
Incorporate Indices into Contracts
If requested, most suppliers will agree to employ an objective third-party source, like RISI, as an escalator/de-escalator in contracts. Price adjustments tied to an independent index can protect both the buyer and the seller when raw material costs like fiber or chemicals fluctuate.For instance, you might have a three-year contract for corrugated boxes in which you agree with your supplier that the price will be reviewed each quarter. If the average linerboard price reported by RISI over the preceding quarter has changed by more than a certain percentage, then your price would be adjusted by a “pass-through” portion of that percentage. The “pass-through” amount can vary depending on the amount of linerboard used to produce the sheet, but is typically 60-75%.Incorporating unbiased price reporting into your agreements will ensure a fair price in a volatile market putting you and your organization at ease. Learn more about our Price Reporting Methodology.
Apply Deeper Grade Knowledge
Even if you don't employ an index, understanding the input costs of the paper grades you buy will help you prepare for unexpected price increases as suppliers’ costs fluctuate. RISI offers data and analysis on all packaging, graphic and feedstock paper grades. You can use PIC to track and analyze costs so you know when your price might change.For instance, old corrugated containerboard (OCC) is a major raw material cost in the production of recycled board. Suppliers often point to OCC cost increases to raise their prices. Similarly, you could point to OCC cost decreases as a reason to bring prices back down. Knowing when to ask for a discount is only possible if you understand and track the relevant costs for the paper grades you purchase.In addition to OCC, PIC provides information on fiber, energy, labor, transport, and exchange rates at a macro and micro level over time. You will have rapid visibility into all the production costs driving the price of the paper-grades you buy. Understanding these costs will enable you and your supplier to agree to a fair price faster saving everyone time and money.