How Price Increases Test Supplier Relationships In Uncertain Times

A reliable supplier can be difficult to replace, especially when conditions are unpredictable. How can you negotiate a price rise while keeping the relationship worth having?

A long-standing supplier announces a price increase, and suddenly years of goodwill are being weighed against next quarter’s budget. You know what they have done for your business. You also know that your finance director will want more than “we have always worked with them” before approving the extra spend. With energy and commodity shocks continuing to affect the global economy, there may be real pressure behind the request. Your own commitments may have become harder to honour too, especially if you have promised customers prices that cannot be changed as quickly.

Why a reliable supplier is worth more than their latest quote

Think about the last time a delivery went wrong or a customer changed an order at short notice. If your supplier knew whom to call, understood the urgency and helped you rearrange things, that familiarity saved work. Replacing it would take time, even if another provider offered an attractive price. A study of 344 relationships between carmakers and suppliers, published in Organization Science, linked greater perceived trustworthiness to more information sharing and lower transaction costs. The least-trusted carmaker spent more of its time with suppliers contracting and haggling than the most-trusted one.

For your business, consider the time saved because the supplier already knows how you work. Include that alongside delivery performance and the service your colleagues actually use when you assess the price.

Loyalty can create expectations

Years of repeat business can leave a buyer expecting flexibility, while years of dependable service can leave a supplier expecting support. A price rise is often the moment those assumptions meet.

It is easy to hear the request as a judgement on the relationship. You may have recommended the supplier internally, renewed through a difficult period or paid promptly when cash was tight. If you have been thinking of these as reasons to expect different treatment, raise them and explain what you are asking for now. Give the supplier something specific to respond to. “The increase is too much” says little about whether the difficulty is the amount, the date or a promise you have already made to your own customers. You might open the discussion like this:

“We want to keep working with you, but we have already fixed our customers’ prices for this quarter. What flexibility do you have on when the increase starts?”

Then explore what is driving their timing and where they could move. If they need an immediate change because a new cost has already taken effect, your next proposal will need to address that. If the date comes from a routine annual review, there may be different options to discuss.

Give the supplier something they can use

Your knowledge of each other can also help you improve an arrangement that has become expensive or inconvenient. Perhaps separate departments place small orders throughout the week, leaving the supplier to organise several deliveries. Everybody has become used to it, although nobody would design it that way from scratch.

Suppose your team could combine those orders, provided it had a dependable delivery slot. Before offering the change, check that the larger delivery would fit your storage space and that colleagues could place their orders in time. You could then propose:

“If you can limit the increase to 3% and commit to the weekly delivery window we have discussed, we can consolidate our orders into that delivery.”

Fewer trips could reduce the supplier’s transport costs, while a fixed slot would let your team plan when staff need to be available. This is trading across issues: offering something the other party values in return for a change that matters to you. A supplier you know well may be able to tell you exactly which ordering habits create extra work and which changes would make a difference.

The relationship continues after the price changes

Now imagine agreeing that weekly delivery, then allowing every department to carry on ordering separately. The supplier’s expected saving disappears, and the next price conversation begins with a reason to doubt your promises. Write the ordering commitment and delivery slot into the agreement alongside the price and start date. Give the colleagues placing orders a clear cut-off time and make someone responsible for combining them. On the supplier’s side, confirm who will resolve a missed delivery before it disrupts your operation.

Prepare for the next supplier price discussion

Before the next meeting, ask the colleagues who use the supplier what they would struggle to replace and what they would like to change. A colleague who spends Friday afternoon chasing deliveries may have a very different view of the relationship from the person approving the renewal.

For help developing these skills across your team, explore our procurement negotiation training. Our Fending Off Inflationary Demands eBook offers further guidance on preparing your response to a supplier price increase.