1_Procurement Insights

Navigating through Supplier Price Increase Demand

increase

Be realistic -You will find a way!

Never accept supplier price increase demand at face value. As a buyer Our job is to try to reduce and delay the impact of any price increase to our company.

Next Ask for a face to face discussion regarding any proposed price increase demand from suppliers, Preferably at your location, not at suppliers.

Never accept retroactive supplier price increase demands. Our customers would be offended, so should we.

Most importantly we should Involve everyone that can help in preparing for a negotiation.

Involve some senior management also because it’s harder for the salesperson to face the company president or owner than his or her usual contact.

Before going to negotiation to settle supplier price increase demand, do make a list of What can we ask the supplier for in return for accepting an increase? Some of the things to ask in return could be —

Cash discounts

Delay of the effective date

Shorter lead times

Increased capacity

Return of some obsolete material for credit

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If the supplier price increase demand is based on a raw material or energy increase that is part of the component cost, calculate increase proportionately. i.e.- if the steel content of the item purchases is 25% of the total weight, the increase should take that into consideration.

Response to an increase needs to be realistic. Denying the obvious (i.e. – currently fuel prices are increasing for everyone) will aggravate the supplier and could lead to retaliation.

Always keep in mind, if you are not ready with alternative Do not threaten to take business away from the supplier. Read details of Strategic Sourcing steps.

Related Topics Across the Web …

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