You’ve Renegotiated – Now What?

In recent months, the commodity bubble has burst and the global economy has slipped into a recession.  The prevailing procurement strategy has been to renegotiate contracts and take advantage of lower cost opportunities.

But, if this recession is like every other recession in modern days, there will be a recovery and a return to economic expansion.  This means that upward price pressure will be rearing its ugly head before you know it.

In the past, a popular negotiation technique in times where suppliers try to get you to pay a higher price is to make the supplier feel unreasonable for breaking a “price promise” and to appeal to a sense of win-win partnership.  But this is not likely to be effective when you just renegotiated your contractual price at a time when the supplier could use those extra few percent of profit margin the most.

Through your actions, you have communicated that it is fair game to renegotiate a contractually agreed upon price.  So renegotiation is fair game in the minds of your suppliers.

Are you prepared for your suppliers to approach you with a price increase request?

If not, now is the time to be proactive and do whatever it takes to avoid or manage price changes.  Or at least to start thinking through your response and reaction.

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