A supplier announces a price increase. Your first instinct is to ask for a cost breakdown, challenge the percentage and wait for a better offer. It feels like negotiation. Too often, it leaves the supplier in control of the number and the timetable.
Three mistakes recur even among experienced procurement teams: asking the supplier to justify the increase, arguing about their proposal without making your own, and waiting until the increase arrives before preparing. Here is what to do instead.
A supplier announces a 12% increase on rates. The reflex is to ask why: send us the cost breakdown, show us what drives this. It is exactly the question the supplier has prepared for.
They built that case months ago and rehearsed presenting it. Every line supports their narrative, because that is what it was built to do. You are unlikely to find the flaw in their cost model using only the data they chose to give you.
The discussion moves to labour rates, inflation indices, energy costs, wage agreements and raw materials. Weeks of meetings follow in which both sides are paid to disagree. Meanwhile, the increase remains the reference point for everything that follows, and time works against you.
“Can you send us a detailed breakdown that justifies the 12%?”
“We have received your proposal. We cannot accept it. Here is our proposal.”
The trap: asking for justification accepts their frame. The question becomes how well they can explain an increase, rather than whether you will agree to one.
Avoid turning their proposal into your problem to solve through a line-by-line debate of their cost breakdown. Reject it and move the conversation towards a specific proposal of your own.
Many buyers spend the negotiation working on the supplier’s number: too high, not acceptable, you need to do better. Then they wait for the supplier to return with something lower.
That means waiting for the other side to improve your position for you. Each round of “not good enough” teaches the supplier that patience pays: hold the number, let the buyer argue, and make a small move at the end. Their anchor stays at the centre of the discussion.
Without a proposal of your own, there is nothing on the table to move towards. Two moves change that.
Respond when the proposal arrives, rather than after weeks of internal review: “We cannot accept this.” Avoid opening a debate about the supplier’s justification.
Make it a number with conditions, within your internal mandate. For example:
“Based on a three-year term and the current named team staying on our account, we can accept an increase of 1.82%.”
Or, if your position supports it:
“No. We require a price decrease of 3.1%.”
All percentages in these examples are illustrative.
“12% is far too high. You will need to come back with something better” leaves the supplier’s number as the only proposal. “We cannot accept this. Based on these conditions, we can accept 1.82%” gives the discussion another concrete point to work towards.
Every week spent discussing their number is a week it remains the anchor. Once your proposal is on the table, the conversation concerns the gap between two numbers, and one of them is yours.
The first two pitfalls happen at the table. This one happens months earlier and determines how much room you have when you get there.
According to research by IMPACT Negotiation Group involving 682 procurement professionals, 92% of price increase negotiations are approached reactively. The supplier’s letter starts the negotiation. They have chosen the timing, the size of the increase and the deadline.
The clock is already running. There is little time to build an alternative, and the likely endpoint is acceptance with a small discount. A proactive organisation prepares before that letter arrives.
Make a clear rejection the standard initial response to a price increase, from everyone and at every level. Align internally so the supplier hears a consistent position.
For every key supplier, track contract expiry and renewal dates, notice periods and when an increase is likely to arrive. Preparation needs to start while there is still time to act.
Plan messages at several levels of the supplier’s hierarchy before the announcement. The aim is to influence expectations early enough that the increase arrives smaller, or does not arrive at all.
Decide what you will put on the table, when you will do it and in which steps. Agree the sequence before the first meeting.
Good suppliers brief your engineers first. Make sure your technical colleagues understand what they can disclose. They should never confirm that there is no alternative or that the supplier is already set for next year.
Without a credible alternative, you start at a disadvantage. Building one takes time and internal persuasion. A switching threat that live projects make unrealistic does not give you a usable alternative.
Reactive: the supplier’s letter arrives, the clock starts ticking, you argue about their number and eventually accept.
Proactive: you track renewal and notice dates, manage expectations, align stakeholders and build alternatives. You are ready to put your proposal on the table first.
A price increase proposal is the supplier’s opening position. Your team needs its own position, backed by a mandate and conditions, before the negotiation gets absorbed by the supplier’s case.
Reject clearly, make a specific counterproposal and prepare before the next announcement. That is how procurement teams regain control of both the discussion and the timetable.
Our Negotiation Consulting services leverage a proven, successful methodology to deliver exceptional outcomes. We empower our clients either through direct support (consulting) or long-lasting capability development to achieve the best possible results in every negotiation.
