The annual review, argued from evidence

The same meeting, opened two ways

It is 14 January 2027 and Lomnitsa has an hour with Ravnsborg's sourcing manager.

Opening one. Costs have gone up. We need three per cent.

Opening two. Here is what your account cost us outside its price last year, line by line, with dates. Two of those lines we would like to change, and here is what we will give you in return. There is a small price movement at the end and I will show you how it is worked out.

The first opening is a demand with no evidence behind it. The only available answers are yes and no, and the buyer's incentive is no. The second is a document. A document can be argued with, corrected, negotiated and — this is the part factories underestimate — forwarded to somebody senior who was not in the room. Course 16.4 owns how to argue. This lesson owns what you walk in holding.

The proposal: two clauses and a fraction of a per cent

Of the seven lines in the concessions ledger, Lomnitsa proposes to change two. It proposes to keep giving the other five, and says so out loud. A proposal that asks for everything back is read as a grievance. A proposal that gives up most of the list is read as a negotiation.

The chargeback figure is worth explaining, because it is the one that sounds aggressive and is not. Of last year's seven debit notes, three arrived documented and Lomnitsa does not dispute them: USD 10,260.00, accepted then and accepted now. The other four arrived as a line on a remittance advice, with no evidence and no deadline, months after the goods landed. They total USD 11,380.00. The clause does not say we will not accept chargebacks. It says send them the way three of your own colleagues already do.

Now convert the package into the only unit the buyer's system understands.

The two clauses are worth USD 0.0958 a piece, which is 1.97% of the FOB. The factory's whole requirement was 2.28%. So the part that genuinely has to come off the price is USD 9,228.86, or USD 0.0148 a piece, which is 0.30%.

Lomnitsa walks in asking for two clauses and three tenths of a per cent, instead of three per cent and a fight. That sentence is the course.

What the factory gives, and what it must not pretend to know

A proposal with nothing on the other side of it is still a demand. Lomnitsa offers two things it can actually deliver: a twelve-week rolling forecast that it will hold capacity against, and first refusal on two lines in the mid-season weeks.

Both are worth something to Ravnsborg, and here is where honest work stops. Lomnitsa cannot price them. It does not know what a held delivery costs a buyer's distribution centre, what its own late deliveries cost in markdown, or what Ravnsborg's alternative supplier charges. Inventing a value for the other side's benefit is the fastest way to lose the credibility that the rest of the document earned.

What you can do instead is ask. What is a firm twelve-week forecast worth to you? Then check the answer against your own ledger. If the buyer says it is worth nothing, the two clauses have to stand on their own merits, and they do. If the buyer prices it, you have learned something about your account that no amount of internal analysis would have produced.

When the answer is no

Assume the meeting fails completely: no clauses, no price. Lomnitsa still has a move, and it is a better one than most factories realise.

Move twelve line-weeks — one tenth of Ravnsborg's capacity — onto Norbeck's workwear, and the factory gains USD 51,486.00. That is 74.63% of the entire shortfall, without a single price conversation. The alternative to raising a price is buying less of the account, and it is available whether or not the buyer agrees to anything.

Except that in this case it is not available, and lesson 4 already explained why. Norbeck's twelve-week programme was declined in April, to keep September and October free for a Ravnsborg drop that never came. The free option Lomnitsa handed to its largest buyer was, exactly, the alternative to the price increase it now has to ask for.

That is the connection worth carrying out of this course. Capacity given away in April is negotiating position lost in January, and nothing in the January meeting can get it back.

Act as a commercial director in an export garment factory preparing for an annual price review with one buyer. I will give you the numbers; you build the proposal. Inputs: buyer [BUYER], last year's pieces [QTY] at [PRICE] per piece, contribution per piece [AMOUNT], line-weeks used [NUMBER], my overhead per line-week [AMOUNT], cost of money [RATE] and the account's cash days [NUMBER], and my concessions ledger for the year [PASTE IT, LINE BY LINE, WITH DATES]. My other accounts and what each returns per line-week fully loaded: [LIST THEM]. First, work out the shortfall or surplus against the overhead sitting on this account's capacity, and state the shortfall as a price increase per piece and as a percentage, to two decimal places. Tell me plainly if there is no shortfall. Second, go through the ledger and split it into concessions I should keep giving and concessions I should propose changing. Prefer changing the ones that have NO CEILING, where the buyer controls how often they are used, over the ones with a fixed annual cost I can simply price in. Third, state each proposed clause change as money at last year's volumes, subtract the total from my requirement, and give me the price movement left over, which should be much smaller than my requirement. Fourth, draft the proposal itself: the evidence, the clauses, what I offer in return, and the price ask last. Say plainly which concessions I am confirming I will keep giving, because that is what makes the rest credible. Fifth, and this is a constraint rather than a request: do NOT estimate what my offers are worth to the buyer. I do not have that information. Instead give me the questions to ask so the buyer prices them, and tell me how to check the answers against my own ledger. Sixth, work out my fallback if the meeting fails: what I gain by moving a stated share of this account's capacity to my highest-returning account, and whether that capacity is actually available. Finish with the break-even probability of losing the account at which asking stops being worth it, the arithmetic behind it, and the two facts from my own history that should tell me whether the real probability is above or below it.

Stop having one meeting a year

The last change is the cheapest and the one factories resist hardest. Send the ledger quarterly, as a short note: here is what your account cost us outside its price this quarter, here is the running year, no ask attached.

Three things follow. The buyer's own people start pushing back internally on the entries before they happen, because nobody enjoys appearing in a quarterly document. Nothing in January is a surprise, and a surprise is the one thing that reliably makes a buyer defensive. And when the merchandiser you have been sending it to leaves — which lesson 6 says will happen in about eighteen months — the notes are in their system, addressed to their company, and the new person inherits the record rather than a blank page.

What you should be able to do now

1. Work out your requirement to two decimal places and ask for that. Never ask for a round number.
2. Convert every clause you want into money at last year's volumes, and subtract the total from your requirement before you name a price movement.
3. Say which concessions you intend to keep giving. The credibility of the two you want back is built entirely out of the five you do not.
4. Never price the other side's benefit. Ask them to, and check it against your ledger.
5. Send the ledger quarterly with no ask attached, so the annual meeting is a summary rather than an ambush.