Supplier Contract Renewal Processes

If I could only track one metric, it's this: Percentage of renewals touched 90+ days before expiration. Why? Because last-minute renewals = zero leverage.  You're negotiating with a gun to your head. Vendor knows you can't switch in 30 days. They know you're operationally dependent. They smell desperation. Result: 5-12% price increases, auto-renewal traps, unfavorable terms. Early renewals = optionality. You have time to:  • Run an RFP  • Negotiate with alternatives  • Review usage and rightsize  • Push back on pricing  • Walk away if needed One customer went from 35% early renewals to 81% in 9 months. Average savings per contract went from 8% to 22%. Same team. Same vendors. Different timing. Here's the playbook:  • Build a renewal calendar (180 days out minimum)  • Set alerts at 120, 90, 60, 30 days  • Make early engagement a KPI for procurement team  • Track "early renewal rate" monthly Tactical beats reactive. Every time.

Negotiate with power by leveraging your BATNA How to deal with tough suppliers 💪   ✅ Background: Recently, we faced a challenging scenario when renewing an ending 2-year contract with a "bottleneck" supplier (definition according to the Kraljic Matrix). The supplier initially proposed a staggering 20% price increase without any clear explanations: a good indication of an abusive bargaining position. However, by precisely defining our BATNA and developing a robust negotiation strategy, we were able to turn the situation to our advantage.   ✅ Understanding BATNA: A BATNA is the best alternative you may have in the case an agreement cannot be made. It's your fallback option. The BATNA helps define the Least Acceptable Offer (LAO) from the other party. A weak BATNA means that you will have to accept a very low/bad offer. A strong BATNA allows you to raise the position of your LAO: it favorably reduces the negotiation window.   ✅ Our Experience: In our case, the initial supplier proposal and their commercial behavior were totally unacceptable. With the stakeholder, we carefully analyzed our position (real power balance) and options. We agreed that a significant change in specifications could be a viable solution. Additionally, we agreed on the possibility of switching the negotiator on our side. By developing and agreeing on a strong BATNA, we were able to increase our LAO. This allowed us to terminate the discussion, stop the contract renewal process as the second supplier's offer was still not reaching our LAO. When communicating the end of the conversations, we used a very neutral and diplomatic language so that the vendor could not really make assumptions against our tough position. After 3 weeks of silence, the supplier came back offering a new contract maintaining the current prices. Opportunistically for us, it was good to accept this proposal, knowing that with bottleneck suppliers this kind of behavior is quite frequent, and we can't expect any kind of positive or constructive long-term relationship.   ✅ Key Takeaways ▪️Preparation is key: a successful negotiation starts with good preparation. Alignment with stakeholders is essential. Understand your BATNA, assess your power balance, and develop a clear strategy. ▪️The Power of a strong BATNA: a good BATNA gives you the confidence to walk away from unfavorable deals. It's creating your true leverage in negotiations. It can radically change the power balance between 2 parties.   Do you have any good practices or examples of BATNA❓ Any other suggestions on how o negotiate in front of a bottleneck supplier❓ #procurement #purchasing #procurementbluesky #futurodecompras

Here’s the renewal experience I think customers actually want: First, don’t wait until 60 days before renewal to reach out. (By then, it’s too late to do anything meaningful.) Instead, at the midpoint of the contract, schedule a quick check-in. Come prepared with three things: 1️⃣ Stakeholder feedback (how’s adoption and sentiment?) 2️⃣ Utilization data (are we using what we’re paying for?) 3️⃣ Market /product insights (has anything shifted in pricing or innovation?) That gives us a real conversation. Turns it from “how are things going?” to “is this partnership still delivering what it should?” If there are red flags, let’s work together to fix them early. That collaboration goes a long way when renewal time comes. Closer to the renewal, we’d check back in.   If things are looking good, we build the approval case together.  If the red flags still exist, it’s time to consider alternative solutions. Churn is SOOOO expensive (for both buyer and seller). And renewal conversations ended up turning contentious. However, this approach saves both sides time and frustration. Suppliers get a fair shot to keep the business (and improve performance if need be), and buyers get a strong business case and can avoid a painful / costly transition.

Today's contract tip is about the relationship between renewal notices and price increases. If you don't pay attention to how one interacts with the other, you may end up renewing at a significantly higher price. Let's say you sign a one-year contract with a vendor. The contract has an auto-renewal unless you cancel in writing 60 days before the term ends. The contract also lets the vendor increase prices for each renewal term. What often happens is the customer forgets to send the cancellation notice by the deadline. So, the customer is stuck for another one-year term. The problem now is that the vendor can increase the price for the renewal term. The customer is stuck in the contract, paying whatever price the vendor sets. Here are four ways that customers can mitigate this risk: 1. Don't have autorenewal. That choice has other effects, but it prevents this scenario. 2. Require the vendor to notify you of any increase 30 days before your renewal notice deadline. Be specific about your rights if the vendor doesn't provide the new prices by that date. 3. Provide that the price cannot increase in renewal terms unless you approve. 4. Limit the renewal term price increase to a modest percentage above the current price. What other ways are there for customers to mitigate price risk at renewal? #HowToContract #contracts #lawyers #law