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The Bottom Line

This past September, the pulp and paper marketplace experienced its first price increase in nearly four years. Originally announced at $50 per ton, in October suppliers ultimately settled for a hike of $40/ton (roughly 6.5%, from $610 to $650/ton) after weathering some customer pushback. For most users of liner board, this translated to a 6-8% rise in their material costs. For those operating without long-term contracts, the increases were higher.

The negotiation process for expiring manufacturer vendor contracts often poses unique challenges. For example, those that have an existing relationship with the incumbent supplier need that relationship to remain constructive, especially since it will be ongoing once the contract is signed. When negotiating topics like price,   this can prove particularly difficult.

The typical manufacturer has dozens, if not hundreds, of contracts in place with numerous suppliers that support its operations (both direct and in-direct spend categories). As a result, staying on top of the expiration dates for all of those agreements to maintain an effective renewal process can present a significant challenge. At a minimum, doing so is simply best practice, but in other cases, such due diligence may also be a regulatory requirement or a board mandate.