When is the right time to renegotiate products and services contracts?

February 1st, 2011

There are more than a few clues as to when the right time to review your purchase of products, services and expense related items.

For most buyers and category managers, cycles are important. That is that the normal flow of business dictates how and why they buy their products and services. Some financial related examples of this are End of Year, End of Period, contract expiration and capital need. Other examples may be seasonal needs, change in demand either up or down or growth through acquisition.

However there are other clues that should also be analyzed on a regular basis that play an important role in predicting cost increases even if you are only mid contract that might make you want to reconsider a contract that is already in place. One of those is unusual spikes in the commodity markets.

An example of the above is the forecast for oil prices. We are hearing a lot lately about oil hitting $100 per barrel with some forecasts as high as $105 be year end. That’s a clue to take a look at contracts that are impacted by oil such as resin markets and fuel prices that affect transportation costs such as diesel prices. Judging how realistic these forecasts are can also be tricky but here are also clues for that such as instability in areas like Egypt because they control daily transit through the Suez Canal of oil.

As a buyer you have to be aware of more than just the need to renegotiate a contract because it is expiring. If you need help doing that your e-procurement provider should be able to offer the category expertise to help you.

We look forward to and appreciate your comments.

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