Business readiness

Supplier Agreements

What are Supplier Agreements?

A supplier agreement is a legal contract with your suppliers, defining the rights and obligations of all parties involved.

A supplier agreement governs the procurement of materials, products or services by your company from a third party for a pre-negotiated price and to be supplied in a certain timeframe.

It specifies the type of materials and products sourced, quantity, quality of goods/service, price, payment terms, confidentiality clauses, specifications and procurement terms and conditions.

A supplier agreement can be categorized as an:

  • Exclusive Agreement: One supplier has the exclusivity for the supply of raw materials or products
  • Non-exclusive Agreement: Multiple suppliers are responsible for the supply of raw materials or products
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Why are Supplier Agreements important for business today?

Having an up-to-date and comprehensive collection of all supplier agreements enables your company to:

  • Keep track of the performance of your suppliers against their obligations/li>
  • Maintain your own compliance against your obligations under those agreements
  • Evaluate the cost related to procurement by your company

Why is it important for an event tomorrow?

Having an up-to-date and comprehensive collection of all supplier agreements is important for an event tomorrow, as it helps:

  • Keep a record of your company’s preferred suppliers and understand their share in the overall procurement expenditure
  • Understand the share of procurement costs by each product line
  • Benchmark your procurement costs against those of competitors
  • Evaluate your supplier performance over time
  • Assess the impact of any volatility in product or delivery on your business

Pros of Supplier Agreements

  • Budget for procurement expenses upfront
  • Compare the cost of procurement against manufacturing in-house
  • Minimise the time and cost of due diligence for company management and potential investors

Cons of not addressing this topic

  • Greater potential for suppliers’ obligations to go unfulfilled without penalty
  • Greater potential for failure to satisfy your own obligations with your suppliers
  • Limited ability to track procurement costs

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