Rethinking Pricing Models to Survive Geopolitical Shifts and Supply Chain Shocks 

As global supply chains face mounting volatility, impacted by trade policy changes and logistical hazards,  procurement must evolve beyond rigid, fixed-price models. Strategic contracting, incorporating flexible price adjustments and index-based formulas, enables businesses to safeguard continuity, ensure fairness, and reduce financial exposure. It is essential for firms navigating cost surges, inflation, and uncertainty. 

With unprecedented geopolitical shifts, export restrictions on strategic raw materials and natural commodity trends—fixed-price contracts often collapse under pressure. Buyers risk overpaying or supply failures, while suppliers face squeezed margins. Contract renegotiations become frequent and contentious, straining relationships. The core challenge is securing cost stability without stifling agility or risking disputes. 

Building Resilience with Index-Linked Pricing Mechanisms 

Embedding price adjustment clauses linked to transparent indices offers a practical, fair solution. These mechanisms adapt pricing based on real market movements—commodities, fuel, labour, or currency—using formulas agreed in advance. H&Z recommends a structured, collaborative approach: define clear triggers, reference indices, adjustment limits, and governance processes. This ensures clarity, budget control, and resilient supplier ties. 

Why Flexible Pricing Is the Future of Strategic Procurement 

We believe flexible pricing isn’t a risk—it’s a strategic asset. By sharing cost volatility transparently, both buyer and supplier win: suppliers maintain margin, buyers avoid inflated fixed rates. Strategic procurement demands adaptability, not rigidity. Our experience shows that price adjustment clauses aren’t just crisis tools—they’re the future of robust, trusted supplier collaboration. With so many external influences now unpredictable—geopolitical shocks, inflation, and raw material surges—this transparency is essential. It builds long-term, resilient partnerships and ensures that cost management is grounded in fairness and foresight, not reactive negotiation.  

An engineering firm designing and manufacturing high-performance systems for heavy industry. 

COVID-19 Challenge: Faced significant cost increases as suppliers – often single-source but business critical – raised prices sharply during the pandemic due to raw material cost increases. 

Post-COVID Issue: When raw material prices fell, in some cases below pre-pandemic levels, the company could not benefit due to rigid, fixed-price contracts. 

Solution Implemented: Introduced pricing mechanisms into contracts, linked to raw material indexes, enabling transparent tracking and review of costs.   

Outcome: The client built a more balanced supplier relationship where both surcharges and cost reductions were fairly reflected, while gaining greater visibility into upcoming price changes. This allowed the buyer to collaborate with suppliers on mitigation actions, and ensured that any surcharges applied were limited strictly to the actual period of impact. 

For more insights or to explore how working with your strategic suppliers can help you stay ahead of unforeseen price risks and market volatility, and how this approach can benefit your organisation, feel free to reach out to our expert below.