Annual price review with a Chinese supplier
Work backwards from the intended price change: agree evidence deadlines, allow time for challenges, name authorised approvers and settle the order cut-off before updating prices. Record accepted orders separately and agree any exceptions explicitly. Cambridge China Bridge can help coordinate the review with its staff in China.
Build the timetable backwards
Start with the intended effective date and the buying cycle it must serve. Check the existing supply agreement for review dates, notice wording and any agreed price mechanism. Put evidence submission, buyer questions, supplier replies, negotiation, final approval and purchasing-system updates into a shared calendar. Give every deadline a named owner.
Allow time for finance and technical review before the approval deadline, taking account of factory closures and absent decision-makers. Agree what happens if evidence arrives late or talks remain unresolved: for example, a written interim arrangement for specified orders. The factory negotiation guide covers the wider negotiating approach.
Close the evidence pack before negotiating
Ask for a product-by-product bridge from the current price to the proposed price against the same specification, currency, packing and delivery terms. Request dated support for claimed material, labour, energy or exchange-rate changes, with an explanation of how each affects your product. Ask about falling costs, productivity savings and expired temporary charges as well.
Set separate deadlines for the initial pack, buyer challenges and corrected evidence. Record missing support and disputed assumptions before the meeting. Keep forecasts distinct from purchase commitments, and avoid counting the same cost movement through both a surcharge and the base price. Use raw-material surcharge checks for that part of the calculation.
Give negotiators a clear mandate
Name who may discuss proposals, who may provisionally agree them and who gives final approval on each side. Ask whether the supplier representative can approve the whole package or must refer it to a manager. Give your negotiator written boundaries for price, currency, payment terms, volume commitments and the effective date.
Identify decisions that need finance, engineering or quality approval. Record concessions as a package, including what the supplier offers in return, and mark proposals awaiting approval clearly. If Cambridge China Bridge coordinates factory discussions, state its mandate and referral points; keep the buyer's final commercial approval explicit.
Define the cut-off and accepted-order treatment
Write the effective date alongside the event that selects the applicable price. An order placed, an order accepted, a shipment dispatched and an invoice issued are different events. Specify which governs, how acceptance is recorded and how pending quotations, unaccepted orders, scheduled releases and split deliveries will be handled.
Create an agreed list of orders already accepted, showing the recorded price, remaining quantity and delivery plan. Propose keeping those prices unless the existing agreed mechanism provides otherwise or a specific amendment is agreed. Record exceptions against named orders. Treat this as a negotiating position to document, rather than assuming the annual review automatically reprices the backlog.
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Release the agreement and check its use
Issue a final price schedule with product identifiers, specification revisions, currency, delivery terms, the effective trigger and accepted-order exceptions. Obtain written confirmation from the named approvers. Retire superseded schedules and tell purchasing, finance and the supplier's order-entry team which version to use.
Check acknowledgements and invoices against the agreed cut-off and backlog list. Keep the evidence, questions, approvals and final schedule together for the next review. Use negotiated savings checks to test whether the agreed outcome reaches actual orders, including any offsetting changes in packing or payment terms.
Frequently asked questions
When should I start an annual supplier price review?
Work backwards from the intended effective date, allowing for evidence checks, supplier replies, internal approval and purchasing updates. Check existing review and notice wording before agreeing the calendar.
What if the supplier misses the evidence deadline?
List what is missing and agree a revised deadline or a written interim arrangement for specified orders. Avoid treating an unsupported proposal as an approved price.
Who should approve the new supplier prices?
Name the final approver on each side before negotiations. Give negotiators written limits and refer changes to specifications, payment terms or volume commitments to the relevant buyer decision-makers.
Should new prices apply to orders already accepted?
Check the existing price mechanism and agree the treatment explicitly. Propose preserving recorded prices for accepted orders, with any agreed exception identified by order rather than applied to the whole backlog.