Flexible agreements allow supply to flow

An unambiguous and workable contract, which enables a supplier to deliver on their promises, is an essential link in any successful supply chain

Any successful business relationship is the result of negotiation between one party in need of products or services and another looking to supply them, with the outcome usually represented in some form of legally binding contract.

The exact nature of both the negotiation and the contract will depend on just what is being bought and how important it is to the buying organisation, but there are a range of elements which might need to be thought about.

Negotiating cost

Price is clearly an important constituent, particularly in cases where items can be sourced from a range of suppliers. “Leveraging buying power to secure the lowest price in a marketplace is entirely valid for many scenarios, for example when buying generic, non-differentiated products or services from competitive markets where there are many providers and it is easy to switch,” says Jonathan O’Brien, chief executive of Positive Purchasing.

Where there are fewer suppliers or capacity is limited, however, price becomes less of a factor, he adds, and can even result in situations where buyers have to compete to make themselves attractive to the supplier. “This could be by promising additional business, paying promptly or investing in relationship building,” he says.

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Procurement