FAQs
How should a purchaser respond to a request from a supplier for an unscheduled price rise?
The supplier needs to give reasons for the price rise. It may, for example, be due to a natural disaster such as the earthquake in Japan last year. This caused serious disruption to the manufacture of components for export to Europe, which had a knock-on effect on the final market price of UK products.
If a compromise can’t be reached, the supplier may have to pull out of the deal.
The purchaser should be aware of the risks to the organisation if the contract breaks down - the products being supplied may be vital to the infrastructure of the business, for example. In the case of a manufacturer, any interruption to the supply of a raw material or component could affect the production line and profitability.
Proactive negotiation to maintain the contract relationship is the best course of action. While the organisation may be unable to accept an increase in price, the breakdown of the contract should be viewed as a last resort.