Commodities Surcharge
As you are all aware, the manufacturing community has been facing incredible pricing pressure and volatility in the worldwide copper and steel markets. The industry standard for the purchase of copper wire for magnetics assembly has always included two components. The first is the negotiated “manufacturing or contract” cost and the second is the variable “commodity cost”. Generally, though these charges were trending upwards, Imag has been able to contain the “commodity cost” increases within a given purchase order, only having to review and adjust your pricing as new orders were placed. However, we have been seeing increasingly volatile changes in the copper markets. Faced with these constant and sometimes dramatic changes we are no longer able to keep our pricing constant unless your order is shipped within 1 week of being placed. As such, all of our quotations will note the “copper commodity cost” at the time of quotation. At the time of shipment, the price of the part will be adjusted upward or downward depending upon the direction of the fluctuation from the time of the quotation.Additionally, the steel industry has also begun adding “surcharges” to our contracted purchase costs. Though generally not as volatile as copper, we have seen large movements in various grades of steel. This is especially noticeable with the specialized grain oriented steels such as M6 and also some “mid grades” of M19/22 materials which are used in manufacturing of magnetics.
Imag works very hard to maintain the highest ethical standards of conduct in doing business with our customers. As such, we feel we must pass these costs directly through to our clients in the most open and visible manner possible. We are not burdening these costs with additional overhead or other hidden markups. Each month and we will share with you the exact surcharge price list as received from our copper and wire vendors. To ensure that these costs are passed through correctly, we will detail the copper surcharge as a separate line item on the invoice for each part number. The copper surcharge will be determined by averaging the previous weeks daily “commodity cost” as published by our vendor. Steel surcharges are changed monthly and we use the table published monthly by Tempel Steel as our reference.
In order to do this in the fairest manner possible we will detail the base unit price for each item you purchase as of the most recent quotation. This will be the base price, and it WILL NOT vary for the agreed term of your blanket order. In addition to this, we will indicate the number of pounds of copper utilized in each part and the current “commodity charge” as it applies to your unit based upon its actual weight. This charge will vary on a weekly basis as the commodity pricing fluctuates from our wire and steel vendors. The commodity price will be determined as of the Monday each week and applied accordingly for each shipment during that week. To ensure that neither party is affected by stocking policies (i.e. kanbans or other planned inventory levels), the surcharges will actually be determined by the date code the items are manufactured.
