Repeat orders: framework agreements and call-offs
The first deal with a new supplier is the most expensive: verification, samples, negotiation, payment security. Every repeat order can be cheaper and faster, provided the terms of the relationship are put in order. A framework agreement, call-off orders and regular reviews turn individual deals into a stable source of supply.
By Hiram Trade Editorial Desk
- Published
6 min read
From first shipment to relationship
Before proposing a longer-term arrangement, assess the first delivery:
- did the goods meet the specification (test results, claims)?
- did they arrive within the window?
- were the documents complete and consistent?
- how did the supplier handle problems?
- did the actual landed cost match your calculation?
If the answers are good, you have grounds for a longer relationship. If not, better to know before committing for a year.
Framework agreements and call-offs
A framework agreement sets the terms that apply to every order, and individual shipments are triggered by call-off orders. Each call-off then only needs quantity, timing and, if agreed, price.
What a framework agreement usually covers:
| Element | Example wording |
|---|---|
| Specification | annex with specification, test methods and umpire laboratory |
| Volume | estimated annual volume, minimum and maximum order |
| Price | fixed for a period, a volume-tiered price list or a formula linked to an index |
| Orders | form, confirmation deadline, lead time |
| Incoterms | rule and place, e.g. FCA terminal at the port of loading, Incoterms 2020 |
| Payment | terms for later shipments, e.g. moving from prepayment to cash against documents |
| Quality and claims | claim deadline, retained samples, how claims are settled |
| Changes | duty to give notice of changes in raw material, process or plant |
| Term and termination | duration, renewal, notice period |
| Law and disputes | governing law, courts or arbitration |
An estimated annual volume should not be a purchase commitment unless the parties want it to be. State clearly whether forecasts are binding.
Consistent quality
In repeat supply, the biggest risk is quality drift: every lot is within specification, but key parameters creep towards the limit. How to control it:
- retained samples: keep a sample from each lot for an agreed period;
- trend the certificates of analysis: chart key parameters lot by lot instead of just checking pass/fail;
- independent testing every N shipments: compare the supplier's results with an external lab;
- specification freeze: the supplier gives advance notice of changes in raw material, process or plant;
- audit or visit: see the plant of a strategic supplier from time to time.
Reviewing terms
Terms agreed for the first shipment are rarely the best ones a year later. Plan a review, for example every six months:
- payment: after several on-time deliveries, the buyer can propose moving from prepayment to payment against documents or short credit terms; the seller can back this with credit insurance;
- Incoterms: freight rates have changed, or one side has a better forwarder;
- packing and logistics: larger lots, different container type, consolidation;
- documents: are they all still needed, is anything missing?
- compliance: re-screen against sanctions lists and re-check registry data, especially after a change of ownership or bank account.
Verify any change of the supplier's bank details through an independent channel, even with a trusted partner. Long-standing relationships are a favourite target of invoice fraud.
Relationship pricing
A relationship opens up pricing mechanisms that a one-off purchase does not:
- volume tiers: a lower price above a set annual volume;
- retrospective rebate: part of the price refunded once a volume is reached at period end;
- price formula: for quoted commodities, price = index + fixed margin; specify the index source, pricing date and currency;
- quarterly fixed price: predictability in exchange for less flexibility;
- priority allocation in shortages: sometimes worth more than a discount.
A fair relationship works both ways: a supplier that receives reliable forecasts and on-time payments is more willing to hold prices when the market rises.
For Philippine exporters, this is where EU buyers are won or lost. Consistent lots, complete documents on every shipment and early warning of any change matter more to a European procurement team than a small price cut.
Supplier scorecard
A simple scorecard keeps term reviews factual:
- on-time, in-full deliveries (share);
- lots within specification (share);
- claims and time to resolve them;
- completeness and accuracy of documents;
- response time to enquiries;
- actual landed cost vs calculation.
A second source
Even the best supplier can have a breakdown, a raw material shortage or a freight problem. For critical inputs, keep a second verified supplier with a smaller share of volume. Knowing an alternative exists also helps in negotiations.
Repeat orders on Hiram
On Hiram, completed deals and their agreed terms stay in your history, so a repeat order with the same supplier can start from the last accepted version rather than from scratch. For how to run negotiation rounds, see our guide on negotiating B2B quotes.
To build lasting supplier relationships, create a Hiram account.
Sources
- ICC, Incoterms® 2020: https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/ (opens in a new tab)
- Europol, Invoice fraud: https://www.europol.europa.eu/cms/sites/default/files/documents/6_invoice_fraud.pdf (opens in a new tab)
- EU Sanctions Map: https://www.sanctionsmap.eu/ (opens in a new tab)
This article is for information only and is not legal, tax or customs advice. Rules and rates change: check the current official sources or consult an adviser before you decide.