Your SME insider for supply chain, negotiations, and procurement
📌Agenda
✔ Negotiation Power Move – Implementing the 7-Step cheat sheet for contract optimization with (preferred) Suppliers.
✔ Breaking Insight – Understanding the real costs of hesitating to renegotiate contracts with (preferred) suppliers.
✔ Case Study – How adi Group achieved significant cost reductions through strategic contract renegotiation.
✔ Trend Watch – Exploring AI-driven tools revolutionizing contract optimization in procurement.
✔ ProcWee™ Takeaways
📖 Mini-Story
How adi Group Used Contract Optimization to Save Over £500,000 Without Damaging Supplier Relationships
When UK-based engineering SME adi Group noticed rising procurement costs eating into margins, they faced a tough decision: press long-standing suppliers for better terms—or risk staying uncompetitive.
Instead of aggressive renegotiation, they chose a strategic path. Partnering with procurement experts, the company conducted a full review of their sourcing structure, pricing terms, and supplier agreements (eXceeding, 2023). The team introduced standardized contracts, clearer rebate models, and structured supplier review cycles.
Most importantly, they didn’t damage trust. By involving key suppliers in the redesign of contract terms—offering volume commitments in exchange for cost improvements—they strengthened those relationships. The result?
✔️ Over £500,000 in verified cost savings
✔️ Improved compliance and risk transparency
✔️ Smarter forecasting and contract alignment without disrupting supply (eXceeding, 2023)
adi Group’s story shows: negotiation anxiety with preferred suppliers can be replaced with strategic alignment—and measurable value.
🎧📝 Executive Briefing: Your Podcast
Your 7-Step Cheat Sheet for Contract Optimization
Following as text ⬇️
🚀 Negotiation Power Move: 7-Step Cheat Sheet for Contract Optimization
Give | Take | Plan
Even with long-standing supplier relationships, you can (and should) optimize contracts - without harming trust. These 7 steps create mutual value and help suppliers become more competitive and efficient.
Clarify Volumes With Flexibility & Forecasting
✔️ Offer 3-month rolling forecasts with fixed volume commitments.
✔️ Add 20% flexibility with a joint safety stock and FIFO usage policy.
➕ Supplier Benefit: Improved planning and reduced obsolescence risk (Fraunhofer IPA, 2023).Embed Process Improvement Reviews
✔️ Schedule biannual reviews for OEE, scrap, and lead times.
✔️ Collaborate on root cause analysis for recurring delays or defects.
➕ Supplier Benefit: Supports lean transformation and internal performance boosts (ZHAW, 2023).Integrate Product Innovation Collaboration
✔️ Set joint development goals (e.g., cost-down redesigns).
✔️ Include incentives based on shared cost savings.
➕ Supplier Benefit: Earlier involvement = longer product lifecycle and secured future business (ZHAW, 2023).Define Strict IP Ownership With Strategic Upside
✔️ Customer retains full IP rights to all co-developed innovations.
✔️ If supplier wants to reuse innovation: negotiate price reductions, bonus payments, equity shares, or exclusivity clauses.
➕ Supplier Benefit: A transparent path to monetize innovation and grow beyond current contract scope (ZHAW, 2023).Agree on Annual Performance Uplift Targets
✔️ Include 1–2% yearly cost or efficiency improvements, jointly tracked.
➕ Supplier Benefit: Supports CapEx planning and builds case for internal optimization investment (ZHAW, 2023).Introduce Indexed Pricing for Transparency & Protection
✔️ Base price adjustments on raw material indices or FX rates.
✔️ Include ceilings and planned review cycles.
➕ Supplier Benefit: Improves cost planning and stabilizes margins (ZHAW, 2023).Establish Joint Review & Escalation Routines
✔️ Hold quarterly reviews with KPI dashboards.
✔️ Include escalation logic for delivery or quality breaches.
➕ Supplier Benefit: Reduces firefighting and builds trust through transparency (CIPS, 2023).
🧠 Breaking Insight
Implement performance monitoring | Learn negotiation | Renegotiate contracts
Why do so many SMEs avoid renegotiating contracts with preferred suppliers—even when costs are rising?
✔️ Lack of structured negotiation processes – Unlike legal or financial risk management, supplier contract renegotiation is rarely systematized in SMEs. 64% of mid-sized companies report they “rely on gut feeling” during supplier renegotiations (CIPS, 2023).
✔️ Fear of damaging trusted relationships – 72% of procurement professionals hesitate to challenge terms with long-term suppliers due to concerns over trust and continuity (eXceeding, 2023).
✔️ No performance-linked contract reviews – Only 27% of SMEs link contract updates to supplier performance or quarterly reviews (ZHAW, 2023).
✔️ The true cost of hesitation – Businesses that delay renegotiating underperforming supplier contracts pay up to 12–18% more annually, depending on category and volatility (Fraunhofer IPA, 2023).
🧠 Emotional Insight
Many procurement leaders fear “rocking the boat” will lead to friction or even supply loss. But when structured properly, contract optimization is not conflict—it’s collaboration with accountability. And that builds deeper trust and more resilient partnerships (CIPS, 2023).
🏆 Case Study
Internal audit | Strategy | Negotiate supplier contracts
adi Group’s Strategic Procurement Transformation
Situation
adi Group, a UK-based SME engineering company with over 750 employees and 17 specialist subsidiaries, struggled with rising procurement costs and a fragmented purchasing structure. The decentralized approach lacked transparency, leading to inefficiencies, uncontrolled spend, and increased risk exposure (eXceeding, 2023).
Tasks
Conduct a group-wide procurement audit to identify risk and inefficiency.
Consolidate supplier contracts and remove redundancies.
Implement a standardized sourcing and supplier management process.
Deliver measurable savings without harming quality or delivery.
Actions
adi Group engaged procurement specialists from eXceeding to lead a structured review. Actions included:
✔️ A procurement maturity assessment across all business units.
✔️ A full spend diagnostic with category-level breakdowns.
✔️ Supplier relationship mapping, risk screening, and rebate audit.
✔️ Contract renegotiation, focused on price terms, rebates, and delivery commitments (eXceeding, 2023).
✔️ Introduction of structured SRM (Supplier Relationship Management) practices and quarterly review cycles (eXceeding, 2023).
Results
✔️ £500,000+ in cost savings through renegotiated contracts and better rebate visibility (eXceeding, 2023).
✔️ Reduced supplier base, enhancing volume leverage and service levels.
✔️ Improved risk control by removing non-compliant and redundant suppliers.
✔️ Standardized, group-wide procurement process aligned with long-term growth.
Conclusion
adi Group’s example shows how even long-standing supplier relationships can be renegotiated effectively with the right structure and data. The result was not only financial gain but a procurement process ready for scale—with improved visibility, compliance, and control (eXceeding, 2023).
What is the primary negotiation challenge most of your employees face?
📈 Trend Watch
Auto-risk-detection | Auto-benchmark | Auto-alerts
AI-Powered Contract Intelligence Is Changing the Game for SMEs
Mid-sized firms are now tapping into AI tools to automate contract analysis, renegotiation triggers, and supplier benchmarking. What used to take procurement teams weeks is now done in minutes—with zero spreadsheets.
✔️ Clause Risk Detection – Tools like Pactum and SirionLabs flag outdated terms and suggest renegotiation points instantly.
✔️ Smart Benchmarks – AI compares your prices against real-time market data, helping SMEs counter supplier price hikes confidently.
✔️ Auto-Renewal Alerts & Renewal Suggestions – No more missed renegotiation windows (CIPS, 2023).
SMEs using AI contract platforms report 11–15% average savings in renegotiated terms within the first year (World Commerce & Contracting, 2023).
ProcWee™ Takeaways & Action Steps
Here’s your rapid-fire roadmap to optimize contracts—without breaking supplier trust:
Audit your top 10 supplier contracts this week
Apply the 3-month forecast + 20% flexibility model
Insert performance-linked review cycles into every new agreement
Use indexed pricing clauses to protect both sides from volatility
Reframe renegotiation as continuous improvement—not confrontation
💬 What’s your biggest negotiation risk right now?
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Sources
eXceeding. (2023). adi Group case study – Strategic procurement review and cost savings. Retrieved April 2, 2025, from https://www.exceeding.co.uk/case-studies/adi-group/
Fraunhofer IPA. (2023). Inventory optimization in supply chain networks. Retrieved April 2, 2025, from https://www.ipa.fraunhofer.de/en/expertise/order-management-value-networks/supply-chain-management/inventory-optimization.html
ZHAW – Zurich University of Applied Sciences. (2023). Supply chain optimization in contract manufacturing. Retrieved April 2, 2025, from https://www.zhaw.ch/en/engineering/institutes-centres/idp/research/operations-management/supply-chain-optimization-in-contract-manufacturing/
Chartered Institute of Procurement & Supply (CIPS). (2023). Supplier evaluation and development. Retrieved April 2, 2025, from https://www.cips.org/intelligence-hub/managing-suppliers/supplier-evaluation
Chartered Institute of Procurement & Supply (CIPS). (2023). Supplier evaluation and development. Retrieved April 2, 2025, from https://www.cips.org/intelligence-hub/managing-suppliers/supplier-evaluation
ZHAW – Zurich University of Applied Sciences. (2023). Supply chain optimization in contract manufacturing. Retrieved April 2, 2025, from https://www.zhaw.ch/en/engineering/institutes-centres/idp/research/operations-management/supply-chain-optimization-in-contract-manufacturing/
Chartered Institute of Procurement & Supply (CIPS). (2023). How to apply the contract management cycle. Retrieved April 2, 2025, from https://www.cips.org/intelligence-hub/contract-management/contract-automation
World Commerce & Contracting. (2023). The economic impact of AI in contract management. Retrieved April 2, 2025, from https://www.worldcc.com/Resources/Research-and-Reports/Artificial-Intelligence-in-Contracting