Procurement - Responding to a Supplier Price Increase

Request the price increase in writing from the supplier with the new price, effective date, and reason for the increase.

Ask the supplier to provide a written breakdown of which input costs have changed and by how much. Use this in negotiation and to justify any pass-through to customers.

Pull all open POs with that supplier. A PO at a confirmed price locks the supplier to that rate - the new pricing should not apply to goods already on order.

Review all accepted quotes where this supplier's pricing underpins your selling price. Calculate the margin erosion on each if the order converts after the increase takes effect.

Identify active jobs where no purchase order has yet been raised but procurement from this supplier is expected. These jobs are fully exposed to the new cost.

Choose to absorb the increase, pass it through to affected customers, or source an alternative supplier. Record the decision against the affected quotes and jobs.

If passing through: notify customers in writing before invoicing at the new rate. If sourcing an alternative: issue RFQs to at least two suppliers immediately, comparing price, lead time, quality, and MOQ.

Once the new rate is confirmed, update the supplier pricing record in the system so all future purchase orders and quotes reflect the correct cost from the effective date.

A supplier price increase notification arrives and no one checks which open jobs or accepted quotes are affected, so the higher cost is absorbed silently and the margin erosion only appears at month-end review.

Quotes issued before the supplier's notification are still at the old price, meaning any new orders accepted from those quotes will be immediately underpriced once the increase takes effect.

The price increase is verbally acknowledged but the supplier cost record in the system is never updated, creating a permanent discrepancy between actual committed spend and the cost assumptions in new quotes.