Price drift is normal, and it is rarely deliberate
Very few suppliers set out to overcharge a good customer. What actually happens is duller. An annual uplift is applied because it is in the contract. A specification changes and the price goes up but never comes back down. A contract auto-renews on the same terms while the market moves. Each individual step is defensible. The cumulative effect, over four or five years, is a price nobody would agree to today.
The question is therefore not "is my supplier ripping me off". It is "when did anyone last test this, and what would happen if we did".
Six practical signals
- No competitive event in three years or more. The single strongest indicator. Markets move; unchallenged prices generally do not move with them.
- Uplifts you cannot explain. If you cannot point to the clause or the index behind an increase, it was a negotiation you did not attend.
- Fragmented spend. Three sites buying the same thing from three suppliers means you are paying three small-customer prices instead of one large-customer price.
- The relationship is warm and the commercials are cold. A supplier who is genuinely helpful can still be expensive. The two are not related.
- Rolled-over contracts. An auto-renewal is a price rise with no conversation attached.
- Nobody owns the category. If no named person is responsible for what you spend on, say, logistics, then nobody is responsible for what it costs.
How to test it without running a full tender
A full competitive process is the right answer for major categories, but it is not the only tool and it is not where to start. In order of effort:
1. Get the spend on one page
Export twelve months of purchase ledger data, group it by supplier, and sort by value. Most businesses find that the top ten to fifteen suppliers account for the large majority of external spend, and that at least one entry on the list is a genuine surprise. This exercise usually takes a day and shapes everything that follows.
2. Rebuild the price
For your largest categories, work out what the price is actually made of: raw material or labour, volume, service level, delivery frequency, payment terms. You do not need perfect data. You need enough to ask a supplier a question they have to answer with numbers rather than reassurance.
3. Test the market quietly
An indicative quote from two credible alternatives, on a like-for-like specification, tells you most of what you need to know. If the market comes back materially below your current price, you have a negotiation. If it does not, you have confirmed you are buying well, which is worth knowing too.
4. Only then decide whether to compete it
Running a tender costs your team real time and it costs the incumbent goodwill. It is worth it when the value is significant, the specification can be described clearly, and you are genuinely prepared to switch. If you are not prepared to switch, negotiate instead, and be honest with yourself about the leverage you hold.
What a reasonable outcome looks like
Savings vary enormously by category, by how long it has been since the last review and by how much of the spend is genuinely contestable. Categories that have been left alone for years usually have more in them than categories that are reviewed annually. Anyone who tells you a percentage before looking at your data is guessing.
Two things matter as much as the headline number. First, whether the saving survives contact with reality. A price reduction that is quietly eroded by change requests within a year was never a saving. Second, whether the business is left able to hold the position without outside help.
The honest caveat
Price is not the only thing you are buying. Switching a supplier who performs well to save a modest amount can cost more than it saves once you count disruption, transition and management attention. The purpose of testing the market is to make that a decision rather than an assumption.