Following on from our recent post about the relationships with suppliers, it was interesting to see in the press that both M&S and Department of Work and Pensions are looking at contract renegotiations with key suppliers.
Many contracts agreed before the economic downturn are beginning to cause concern for procurement teams, even more so with a weak sterling to consider when negotiating with suppliers outside of the UK.
Contract renegotiations will be a key exercise for many procurement professionals throughout the year, and not an easy one at that. If contracts cannot be negotiated, this leaves only a few choices; pass on price increases to consumers, make cost cuts elsewhere or drop product lines altogether, as highlighted recently when Belgium Supermarket Delhaize delisted over 250 Unilever products after refusing to meet price increases for product promotion.
In an interesting move to tackle the challenges ahead, BMW and Daimler have recently come together to take advantage of economies of scale by jointly purchasing electronics. As demonstrated by these two automotive giants, perhaps now is the time to make some otherwise unthought-of strategies - is there a better way to approach your contract negotiations? What could you offer your suppliers in exchange? After-all, it is a two-way street.
