Contracts Influence Futures
If you really use your supply chain effectively you aren't just looking at tactical arrangements.
Its simple and well understood that if you buy tactically, without any kind of commitment, implied or actual, that you will pay premium pricing.
Some will argue that if you enter contracts you could be bound by the same supplier for years.
In a sense that's true but you can also structure contracts with break clauses if you want to change suppliers.
You can also gain advantage by managing through robust service levels which drive good supplier performance. If they don't perform it may cost them!
Of course in return for a longer term commitment you can drive better deals. Not just at the start of the contract but annually by using benchmark or volume discount clauses.
Such relationships encourage suppliers to maintain good relationships. It also offers them insight to your business and if they're clever will use this intelligence and proactively suggest new innovation.
You may find that if structured correctly you create a fruitful and long term relationship. One that helps your business develop with a similarly beneficial commercial and operational support model.
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