- Tags : Strategic Purchasing
By: ProcurementIQ Staff Writer, Mara Michael
Each winter, businesses throughout the United States must prepare for harsh weather conditions that generate hefty expenses. While the Polar Vortex of 2014 cost the economy $15 billion, each winter since has racked up bills in the neighborhood of $1 billion.
Looking ahead to the coming months, businesses can start preparing now to limit the hit on their bottom lines. Buyers in the following markets are encouraged to prepare, especially those with facilities in areas that experience harsh winters, as these products and services are often prone to seasonal price growth:
- Ice & snow surface treatments
- Snow removal services
- Window and door installation services
- Portable generators
Savvy buyers with an understanding of market characteristics, the structure of contracts, and the availability of bulk and bundling discounts can reap lucrative rewards. Overall, businesses that gather the right information and properly prepare can improve their negotiation leverage and come out on the winning end of their annual confrontation with Mother Nature.
Ice & Snow Surface Treatments
Many businesses need treatments that remove ice and snow from driveways, pathways and parking lots during the winter months. These treatments help businesses cope with winter conditions, so demand rises as winter nears. In response, prices spike, and then decline again once the cold weather passes.
Because of the recurring cycle of price increases and decreases, prudent buyers should take steps to reduce costs. Procurement departments can purchase bulk treatments in advance of cold weather to achieve lower service prices. Buyers can also determine if suppliers of ice and snow surface treatments sell non-winter products, like fertilizer and dust control treatments, that can be of use at a future time. If so, buyers may be able to receive bundling discounts by purchasing these products at the same time as ice and snow surface treatments.
Finally, while annual precipitation across the United States has been falling during the past three years, overall demand has been growing. In addition, there have been shortages in surface treatment materials. Due to these trends, ProcurementIQ expects prices for these services to grow at an annualized rate of 3.7% in the three years to 2020.
Snow Removal Services
When the amount of snow or ice is so great that surface treatments won’t work, buyers typically look to snow removal service providers. Like ice and snow surface treatments, snow removal is subject to significant seasonal fluctuations in price. Right after the first snowfall of the season, demand increases and prices shoot up.
While ProcurementIQ expects price increases to be incremental, buyers located in regions with significant snowfall can reduce the impact of demand shocks by signing contracts with vendors before the start of the season. Contracting suppliers during warmer months will reduce buying lead time and give buyers ample time to draft an RFP, evaluate suppliers and negotiate terms. In addition, purchasing a multiseason contract affords buyers much more negotiation power than they have with single-season or single-occurrence purchases.