3 Ways to Renegotiate Supplier Contracts


When things are shaky in the economy, business owners of all sizes look for ways to reduce costs and conserve resources. Though this can be done a number of ways, you may be able to find some crucial savings by renegotiating your vendor contracts. Whether you are dealing with hydraulic motor suppliers or paper products, you need to consider changing how you approach your contracts if you want to reduce your bottom line.

Bring Value to the Vendor

You may need to redefine your relationship with the supplier. Rather than just being an account, add more value to your transactions. Perhaps negotiate a lower rate for your supplies by finding new market opportunities to the vendor. Reduce the risks the vendor assumes through your account, perhaps offering to sign a long-term lock-in contract. Make sure that your rate won’t fluctuate or if it does, it is still within a financially-beneficial position. You may have to be creative in the way you find value propositions, but it is possible.   

Change Your Demand

If you come up empty with adding value, try to analyze your demand. If you have a lot of small orders, consider consolidation to help reduce delivery costs and avoid inconsistencies in delivery times. Ask about new rates based on fewer deliveries but in larger quantities. You could even look at forming a partnership with others that use the same vendor to demand an across-the-board rate reduction. This works if you have a better price elsewhere already lined up. You don’t want to make empty threats. If there are ways to consolidate what you purchase with one company, this could be another way to negotiate better rates.

Look for a New Supplier

There is always the potential to go find a new vendor. Powerful suppliers aren’t usually as willing to negotiate rates as smaller local companies. Though you may find that a smaller company has a comparable rate, consider how the change could provide other benefits. Will you get more consistency with deliveries? Are there payment methods or shorter contract requirements that work best for your company? Don’t jump ship because you are given a first-time discount. Look at the long-term costs of the contract before making a decision.

Even if you aren’t unhappy with the service you are getting, it doesn’t hurt to try and renegotiate contract terms in favor of a cost-beneficial change. You can always benefit from fewer expenses and more savings.