Three Times the Purchasing Scale, the Same Contracts From Five Years Ago
A procurement audit found that the distributor was being billed according to price lists negotiated at two to three times lower order volumes. Renegotiation restored margin and standardized payment terms with key suppliers.
Time to first result: 5 months
Context
Over five years, the company grew at a pace rarely seen in the distribution industry. It expanded from four branches to eleven, and revenue more than doubled. The growth was driven by new locations and an expanding customer base, not by renegotiating purchasing terms. The master agreements with key suppliers, signed early in the growth phase, remained unchanged.
Challenge
No one at the company was formally responsible for periodically reviewing commercial terms with suppliers. Renegotiation was treated as an ad hoc action. Management suspected that, given its current order volume, the company should be getting better terms than those negotiated years earlier, but lacked the data to calculate this for each supplier individually.
What we found
Grevo's procurement audit covered three years of order history with eight key suppliers, together accounting for approximately 65% of the company's merchandise purchasing value. Comparing actual order volumes against the discount thresholds written into the contracts showed that, with six of these suppliers, the company had long since exceeded the threshold qualifying it for a higher discount rate, in some cases by two or three times over. Payment terms, meanwhile, varied widely between suppliers, ranging from 21 to 45 days, with no correlation to volume or length of the relationship.
What we proposed
Grevo prepared a separate negotiation dossier for each of the six key suppliers: order volume history, a comparison of the current discount rate against the threshold the company actually qualified for, and a proposed common payment-terms standard of 60 days. The renegotiation sequence was ordered from the supplier with the largest share of purchases down to the smallest.
Implementation
The Grevo team conducted the negotiations together with the procurement director and management, basing every argument solely on the client's own purchasing data. With the three largest suppliers, order volume alone proved sufficient to justify moving to a higher discount threshold. Renegotiation of all six master agreements was completed within five months of the audit's start.
Result
The renegotiations delivered an average purchasing discount increase of 2.1 percentage points across the six key suppliers. At the current purchasing volume, this amounts to roughly €420,000 in annual savings. All key suppliers were moved to a uniform 60-day payment term, which released approximately €1 million in working capital as a one-off gain. The updated contracts include a mechanism for automatically reviewing discount thresholds every 12 months.
„We grew from four branches to eleven, so I assumed our supplier terms were growing along with us. The audit showed that with six key suppliers, we were buying two or three times more than the discount threshold written into the contract, and no one had ever worked that out before.”
— CFO, technical supplies distributor
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