When to Review Pricing After Input Cost Shifts

A Taichung metal components supplier faced a twelve percent increase in steel costs over six months. Their sales director wanted an across-the-board price increase immediately. Their largest customer—a Japanese automotive tier-one—had a contract with ninety-day price review clauses.

We mapped each product family’s contribution margin after the cost increase. Forty percent of SKUs were still above target margin even at current prices. Another thirty percent were between five and fifteen percent below target—recoverable with selective increases. The remaining thirty percent had been below target before steel moved; raising prices on those lines alone would not restore profitability without volume loss.

The company implemented a tiered response: no change on high-margin legacy parts where switching costs protected share; a six percent increase on mid-tier items with clear cost pass-through documentation; and a joint value-engineering discussion with the Japanese customer on the lowest-margin fasteners, trading a modest price rise for a longer contract term.

Blanket price increases feel fair internally but rarely match customer economics. Segment your catalogue by margin headroom and contractual flexibility before announcing changes. Customers who understand your cost structure—and see you protecting shared value—accept adjustments more readily than those surprised by a uniform letter.