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The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
byquonset ( 4839537 ) writes:
We have contracted prices from our PC supplier. We buy thousands of machines each year. I raised the question in our weekly meeting with the contractor if these increase in memory prices would affect our contracted prices. I was told no.
However, after thinking about this for a bit, I realized the supplier could always claim force majeur and raise prices. Granted, it would have to go back through the contracting process and get approval for the new prices, but they could do this.
Nothing yet, but I keep wai
bytlhIngan ( 30335 ) writes:
We have contracted prices from our PC supplier. We buy thousands of machines each year. I raised the question in our weekly meeting with the contractor if these increase in memory prices would affect our contracted prices. I was told no.
However, after thinking about this for a bit, I realized the supplier could always claim force majeur and raise prices. Granted, it would have to go back through the contracting process and get approval for the new prices, but they could do this.
Nothing yet, but I keep waiting for something like this to come down the pipe.
Chances are, your PC vendor likely leveraged that contract to lock in prices - they know you buy say, 5000 PCs a year. That equates to 10,000 memory modules and say, 100,000 memory chips. Since they likely are a large company, that is added to other company orders and means they may lock in supply for say, 10,000,000 chips a year for a price. That price is locked in with the memory chip maker and probably represents about 80% of their manufacturing capacity once they add in everybody else.
The thing is, this is a solid baseline. Could they break the contract and sell more on the spot market? Maybe. But what if the gamble fails and they now have chips that they can't sell? They'll have to discount those and then those big vendors might be able to lock in at better prices.
These are long term futures contracts that work just the same as farmers who pre-sell their crops for the season.
Chances are the vendor will not want to break the contract - because the situation is likely temporary and having to go through the whole process is painful. And you likely realize it's a short term pain, so you probably only want a short term PC contract. The risk for the vendor is you might go with someone else - a 6 month PC contract for 2500 PCs is far easier to bid for by many more companies who might be willing to offer a lower price than your existing vendor.
Heck, maybe you go with a monthly contract - who can supply you with 400 PCs a month, opening yourself up to more competition and your vendor to smaller and smaller margins until things stabilize. Or they can rely on the fact they have locked in contracts with memory makers to keep your locked in prices and keep everything the same.
Things might be different in a year when those futures expire. But a year is a long time and who knows what prices can be like then. It's not worth even thinking about breaking the contract until it's much closer and you can run the numbers again.
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