Commodity markets have experienced volatility, with sharp price increases in 2021-2022 for energy, metals, and polymers, followed by declines in 2023-2024. Purchasing organizations now focus on negotiating fair prices based on raw material and energy costs. A key tool is the spend digital twin, which models purchasing spend by analyzing input cost drivers and tracking fair price development over time. This approach combines weighted price indexes to establish fair market prices for categories or parts, accounting for factors like materials, energy sources, labor, and markups. It identifies gaps between supplier prices and fair market indexes, addressing asymmetry in cost awareness. By revealing spend developments, the digital twin aids in negotiating reductions in deflationary markets.

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