The unit price came down 6%. The minimum order tripled.

Purchasing wins get measured on the line item. The cost that offsets them usually lands somewhere the line item cannot see.

By Steve 5 min read
Abstract bridge artwork for The unit price came down 6%. The minimum order tripled.

A supplier negotiation closes well. The unit price on a core input falls by 6%, the new price file is circulated, and the annualised saving is written into next year’s plan. Nine months later, gross margin is flat, the stockroom is fuller than it has ever been, and nobody can quite explain where the money went. This is one of the most reliable patterns in procurement, and it is not caused by suppliers behaving badly. It is caused by the fact that price is one term in a contract with…

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