How We Cut a 25% Price Increase to 10% Without Switching

The 25% Price Increase Crisis: When Changing Suppliers Isn’t the Answer

The 25% Price Increase Crisis: When Changing Suppliers Isn't the Answer

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A major international brand faced what seemed like a straightforward supplier problem: their Chinese manufacturer suddenly announced a 25% price increase, citing rising raw material costs. The relationship had already soured after a month-long Spring Festival delay that the client couldn’t understand. Frustrated and feeling deceived, the client reached out to us with a simple request: “Find us a new supplier.”

Most sourcing companies would have immediately started supplier hunting. But we knew the real question wasn’t whether we could find a replacement – it was whether changing suppliers would actually solve the underlying problem.

Kesulitannya:

The surface issues:

25% price increase demand from current supplier
Month-long production delay during Chinese New Year
Complete breakdown in communication and trust
Client convinced the supplier was “garbage” and unreliable

The hidden complexity:

Client had been deliberately concealing their true business size
Supplier assumed they were dealing with a small, one-time customer
Neither party understood the other’s perspective or constraints
Raw material costs had actually increased – but by how much?

Solusi Kami:

Instead of rushing to find a replacement, we launched a three-pronged investigation:

Market Research: We researched actual raw material price increases across the industry. The shocking discovery: raw materials had indeed increased, but only by 10% – not the 25% the supplier was demanding.

Competitive Analysis: We quickly identified and contacted alternative suppliers matching our client’s requirements. This gave us real market pricing data and a genuine backup plan.

Supplier Deep Dive: The most revealing part was a one-hour phone call with the original supplier’s owner. What we discovered completely changed our understanding of the situation:

Annual revenue: $10 million USD (70 million RMB)
Extensive experience in our client’s exact market segment
Perfect capability match for our client’s needs
Root cause of problems: supplier believed client was a small, transient customer

The supplier had been providing minimal service because they assumed the client would disappear after a few orders. The 25% price increase was essentially a way to either maximize profit from a departing customer or encourage them to leave entirely.

Our Strategic Solution

The conventional approach would have been: “Give us a better price or we’re switching suppliers.”

Our approach: Completely reframe the relationship by revealing the client’s true scale and potential.

The breakthrough conversation: Instead of threatening to leave, we focused on correcting the supplier’s misconception. We revealed that our client’s annual sales volume matched the supplier’s own revenue – making them an ideal long-term partner, not a disposable small account.

The revelation: When the supplier realized they were dealing with a major client with significant growth potential, their entire attitude shifted. They immediately:

Adjusted the price increase to only 10% (matching actual cost increases)
Requested to communicate directly with us instead of the client
Committed to premium service levels going forward

Hasil:

Immediate savings: 15% cost reduction (from 25% increase to 10% increase) Retained value: High-quality supplier with proven capabilities and market expertise Improved relationship: Direct communication channel established Long-term benefit: Supplier now treats client as priority account

The Bigger Lesson: Total Supply Chain Cost

This case study illustrates a fundamental shift in how we approach client value. Early in our business, when clients asked “What can you bring us beyond finding suppliers?” we struggled to articulate our value beyond “reducing your headaches.”

The transformation came when we evolved from a simple procurement agency to a supply chain management company focused on total supply chain cost optimization.

Total supply chain cost includes:

Purchase cost: The actual product price
Chain cost: Logistics, shipping, and handling expenses
Transaction cost: Communication, quality control, and relationship management overhead

By focusing on total cost rather than just unit price, we can often achieve better results by optimizing existing relationships rather than constantly switching suppliers.

The strategic insight: Sometimes the most expensive decision is changing suppliers. A 15% price reduction with a known, capable supplier often delivers better total value than starting over with an unknown entity – especially when that supplier has domain expertise and proven capabilities.

Key Takeaways for Procurement Leaders

Question everything: When a client says “find us a new supplier,” ask whether supplier replacement actually solves the core problem.

Investigate thoroughly: Market research, competitive analysis, and deep supplier investigation often reveal solutions that aren’t immediately obvious.

Think total cost: Unit price is just one component of total supply chain cost. Factor in relationship value, capability fit, and switching costs.

Bridge communication gaps: Many supplier “problems” are actually relationship and communication issues that can be resolved more effectively than supplier replacement.

Leverage scale effectively: Help suppliers understand the full potential of the relationship, not just current order volumes.

Ulasan dari Klien Kami:

“I was ready to burn bridges and start over. Instead, Asian Sourcing Group showed me that sometimes the problem isn’t the supplier – it’s the communication. They didn’t just save us 15% on costs; they turned an adversarial relationship into a partnership. Two years later, this supplier has become our most reliable partner.”