What Are The Different Types Of Price Indexes In Procurement?

Introduction

Are you tired of the confusing jargon surrounding procurement and pricing? Look no further! In this blog post, we’ll break down the different types of price indexes in procurement so that you can navigate this complex world with ease. Whether you’re a seasoned professional or just starting out, understanding these indexes is crucial for making informed purchasing decisions. So let’s dive in and demystify the world of procurement pricing together!

Consumer Price Index (CPI)

A consumer price index (CPI) is a measure of the average change in prices paid by consumers for a basket of goods and services. The CPI is used to track inflation and is often considered a key indicator of the health of an economy. A variety of factors can influence the CPI, including changes in supply and demand, taxes, and government policies.

Producer Price Index (PPI)

The Producer Price Index (PPI) is a measure of the change in prices paid by manufacturers for goods and services. The PPI measures changes in the prices of finished goods and services that are purchased by businesses. The index is used to measure inflation and deflation in the economy.

The PPI can be used to predict future inflationary trends, as well as to help assess current economic conditions. The index is released monthly by the Bureau of Labor Statistics.

Import Price Index (IPI)

The Import Price Index (IPI) measures the change in prices of imported goods and services purchased by U.S. residents. The index is based on data from the Bureau of Labor Statistics’ (BLS) import price program.

The IPI covers a wide range of imported goods and services, including:

– Crude petroleum
– Consumer goods
– Capital equipment
– Intermediate materials

In addition to its overall index, the BLS also publishes separate indexes for crude petroleum and finished goods. The crude petroleum index reflects changes in prices paid for unrefined petroleum products such as crude oil, natural gas liquids, and other hydrocarbons. The finished goods index covers a broad range of manufactured products, including computers and other electronics, automotive parts and vehicles, chemicals, and metals.

Export Price Index (EPI)

Export price indexes (EPI) measure the change in prices of goods and services exported from a country. The index can be used to track the competitiveness of a country’s exports, as well as to identify trends in international trade. EPIs are calculated using data on export prices from a sample of exporting firms.

Conclusion

Price indexes are an important part of procurement, as they provide insight into the current market price of goods and services. Different types of index exist such as the Consumer Price Index (CPI), Wholesale Price Index (WPI) and Producers’ Price Index (PPI). Understanding these categories helps buyers in understanding how prices may increase over time, allowing for better contracting decisions to be made. Ultimately, with a robust pricing strategy that incorporates all these elements, it is possible to achieve cost savings for organizations while also driving quality throughout the supply chain.