Buyer Leverage Materiality
What is it?
The Buyer Leverage shows how material our spend is for our supplier by comparing our spend with the supplier’s total annual revenue.
- Low Leverage: Spend is 0-1% of the supplier’s revenue
- Med Leverage: Spend is 1-5% of the supplier’s revenue
- High Leverage: Spend is 5-100% of the supplier’s revenue
Please note:
The Buyer Leverage takes into account all our spend volume with the supplier parent.
When clicking on Show Details the Platform also gives us an indication of the Supplier Leverage, which compares how much the supplier spend represents in terms of our overall spend with the rest of our suppliers we have analyzed on the Platform.
Why is it important?
The more business we do with a supplier, the more leverage we have. Suppliers are more likely to offer payment terms or pricing concessions to retain their business with their large customers.
Having Medium to High Leverage with our suppliers gives us a negotiating advantage and allows us to use our influence to achieve our negotiation objectives because moving our business would have a meaningful impact on their revenue and cash flow
Other factors that influence our leverage include the number of alternative suppliers we have for the goods/services provided by the supplier, whether or not the supplier’s contract is due for re-negotiation soon, the length of our relationship with the supplier and a good track record of paying our bills on time.
