Do we plan for price increases from vendors? Why Not?

What if one of your biggest suppliers increases their prices?

What will you do if your biggest vendors said, “our prices are increasing this year by 20%” or if these vendors were in USD and our Aussie dollar dropped by 20%. Do you have an extra 40% in your OPEX budget?

How would you handle a big price increase from a key supplier?

What if that vendor was strategic or emerging – with a high current spend? 

How significant is your organisation’s level of investment in the specific vendor’s products or services?

Vendor dependence is an issue, and if vendors are replaceable, what is the switching cost? We depend on our suppliers, and there can be significant reputational risk and revenue impact that can come from an extended outage or disruption from the vendor.

How we manage the risks

Relationship and business impact are two key measures used by Gartner to distinguish between strategic and emerging vendors, tactical and legacy vendors. We manage these relationships with a good framework, and that means meetings, engagement and trying to plan for those high impact low occurring risks – the dreaded black swans!

We have been setting organisations up for better results in their contracting and conducting procurement for them since 2003. The Strategic Directions Group is fiercely vendor-independent, but don’t take our word that we do things well in vendor and procurement management. Be sure to call and speak with us. We would be glad to put you in touch with one of our clients and are happy to let them tell you how we do it better.