* Current Situation: Supplier A has provided reliable and high-quality components to FGH, Inc. for many years.
* Price Increase Notification: Supplier A informs FGH of a significant anticipated price increase due to building a new production facility.
* Negotiation Directive: FGH's supply manager is directed to negotiate a new contract only if Supplier A agrees to maintain current pricing.
* Preparation for Negotiation: Determining if the parts can be produced elsewhere provides the supply manager with leverage in negotiations. This research will show whether FGH has alternative sources or if Supplier A holds a monopoly on the components.
* Negotiation Leverage: Knowing that there are alternative suppliers can strengthen FGH's negotiating position, possibly leading to more favorable terms or at least a better understanding of the market.
References
* ISM. (n.d.). Strategic Sourcing and Supplier Selection.
* CIPS. (n.d.). Effective Negotiation Strategies in Procurement.