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Customer was bidding out 100% of their volume on an annual basis. They experienced frequent problems where they might not meet their anticipated monthly volume demand and the supplier would then penalize them, especially if the fixed price was above prevailing market levels.
Guttman Energy suggested that the customer bid out a smaller percentage of their anticipated demand (80-90%) which gave them flexibility in case demand was lower than expected.
By implementing the proposed solution, the customer gained the opportunity to procure fuel at a more opportunistic point in time. Additionally, looking at a different pricing mechanism gave them another option for buying better depending on what the market was doing. Guttman’s solution provides some flexibility to capture better pricing on a small portion of their business and avoid penalties due to under- or over-lifting on their bid contract.
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