With the tariff whirlwind happening over the past few weeks/months, we’ve been hearing from a number of our supplier customers about pricing challenges. We thought we’d share some insights on what we’ve learned and how our customers are handling it.
As we all know, tariffs are an ever-changing target and will most likely continue to fluctuate in the coming weeks/months. The challenge in our specific eProcurement and punchout industry is the ability to incorporate those charges into your pricing while maintaining existing pricing agreements.
How does this affect punchout or eProcurement, you might ask?
Obviously prices are changing, but there are a few concerns when it comes to punchout and eProcurement. Changing prices is nothing new in a punchout catalog of course, but what if you want to show the tariff increase as a separate line in the shopping cart instead of including it in the core product price? Or what if your customer has contract pricing and you can’t change product prices per the agreement?
The challenge is making the prices show accurately, but also properly back to the eProcurement system. If you add a new field or new line item with a tariff/surcharge, that data might fail to return correctly with an invalid UNSPSC or the customer could even delete that line entirely. Most eProcurement systems let the user change cart quantities and delete lines before routing a PO for approval.
What are suppliers doing about tariffs in their punchout catalogs?
So far, we’re exploring a few options with our suppliers. The first option is simply updating pricing to be net of the tariff increase. This is the easiest way to handle any price increase, be it tariff, supplier cost increase, or raw material increase. In fact, this is the least disruptive change when it comes to eProcurement. Our user interface and automation tools allow our customers to update pricing as often as every hour. When product pricing is automated, it requires no interaction or involvement from our team or their technical team.
As far as the buyer’s side goes, no changes are needed to the eProcurement integration on the punchout, PO, or even the invoicing side. The buying organization may notice the price increase, of course, but it can be easily explained with the right messaging and/or a note or pop-up within the punchout. Our recommended approach is a combination of a price increase and a notice indicating the reason for the increase when the customer first punches out to the catalog.
Another option is to add a percentage-based fee as a line item in the cart. This simply adds an extra line in the shopping cart, labeled “Service Fee” or “Tariff Surcharge,” along with a fee that is added to the cart return. This can be a percent of the shopping cart or a flat rate fee, if you so choose.
This approach, as mentioned earlier, has challenges because most eProcurement systems allow the user to remove line items before submitting a requisition to be approved. This is why we recommend changing pricing as the preferred strategy.
The final option doesn’t directly involve the punchout per se, but if you submit invoicing electronically via cXML or EDI, there is always the option to add a tariff fee to either the freight or shipping fields in the cXML invoice. This method has it’s own challenges because a customer may short-pay the invoice without the tariff fee.
In summary, there is no simple way to handle tariffs, but there are options, of course.
If you’re struggling with tariffs and how to handle them in your eProcurement integrations, you know where to find us.