Renegotiating supplier agreements

Issues to consider to proceed with confidence

In challenging times, major suppliers and their customers frequently have mutual need for flexibility and creativity. Even amid pressure to save money and conserve cash, both usually desire to maintain their long-term relationship and reliable, stable performance. Our commercially pragmatic approach enables us to help buyers cut costs and maintain relationships through constructive renegotiation.

 

Issues you will want to explore

Here are six important issues you need to consider, and in many cases pursue, with respect to your major supply/supplier agreements:

Goal setting. Negotiation is a process of give and take. It’s important to know what you need (and really must have) beyond cost-reduction, and to understand what your supplier requires.

Preparation. A careful review of contract terms may reveal provisions that have new relevance in difficult economic times. Leverage that has been forgotten or overlooked may now prove useful.

External benchmarks. Are you paying current market rates for the goods or services you purchase? Can this be independently verified? Knowing whether you are above or below market may help both sides better manage expectations and arrive at “win-win” adjustments.

Market standards. Are the terms of your agreement consistent with current market practices? If not, how would these provisions read if they were negotiated today? At what savings?

Alternatives. Beyond price, what terms could be changed to give you and/or your supplier increased economic flexibility, while meeting your needs. Could you increase volume? Be more flexible on delivery or quality requirements? Could either of you assume greater risk exposures?

Supplier suggestions. Ask your suppliers what they would do differently to improve your processes or cut your costs. Are some things they are currently obligated to do too expensive for either of you in today’s market?

 

Our experience and service advantages

Global insights, practical experience. We work with leading companies in dozens of industries worldwide. We know what works and what does not work in commercial negotiations and also ways to better leverage scale across markets and product lines to achieve desired outcomes for clients and their suppliers. Our ability to work closely with clients, wherever they are located, gives us the added benefit of real-time exposure to their business reality.