In the realm of “things that would make supply chain management easier,” global pricing would be at or near the top of the list.
Imagine: You are a buyer, and no matter where in the world you purchase a component; no matter what currency you purchase it in; no matter which distributor you purchase it from… the price is the same.
But global pricing is still an elusive target for the supply chain. There are structural reasons — the way business is conducted — and there are perceptual reasons. Let’s look at perception.
The No. 1 reason global pricing is difficult is because customers expect prices to differ from region to region. About 10 years ago, someone came up with the notion that manufacturing stuff in China will make it less expensive because wages in China are lower. It’s true that wages are lower, but it’s not true that everything made in China is automatically cheaper. Moving components in to, out of, or around China carries a cost. But customers expect prices to be lower in the Far East; therefore they are loath to pay US- or EU-level prices. So to remain competitive, component makers lower their prices — in the Far East.
The No. 2 reason global pricing is difficult is fear. Component makers and their resellers fear that “global price” will become the equivalent of “lowest price.” The lower the price, the lower the profit margin. The lower the profit margin, the harder it is to make a buck or a euro or a yen on a component sale.
This is a valid fear. What buyer wouldn’t source components from a low-price region if they could? After all, that’s part of their job — to keep costs low. The problem is: Price and cost don’t mean the same thing. The cost of sourcing a part from Asia could ultimately be higher than the component’s listed price. And until the supply chain can negotiate terms on the basis of cost and not price, global pricing remains elusive.