Material Surcharge Rate (MSR)

The material surcharge rate is used to:

• only share commodity price inflation rates between trading partners without constantly updating price data.
• perform costing on a stable price basis.
• more reliably predict imputed risk of variants in commodity prices.

The basic approach of MSR is to define a fictitious base price (so-called material price base) for all commodities with fluctuating prices. The difference caused by the price fluctuations is then be added to the price of the product.

From a manufacturer’s perspective, there are two types of a material price bases:

• Material price base supplier:

  Agreement between the commodity supplier and the manufacturer of the product.

• Material price base customer:

  Agreement between the manufacturer of the product and the customer.