Why Supplier “Fixed Deals” Aren’t Fixed at All
Suppliers love the word fixed. It sounds safe. Predictable. A shield against market swings. But in practice? Most so-called fixed deals are riddled with hidden charges, clauses, and conditions that leave your budget exposed. This page unpacks the truth – and why treating supplier proposals at face value is a direct hit to your margin.
The Illusion of Security
When suppliers pitch a fixed deal, what they really mean is: “We’ve fixed our margin.” Your costs, on the other hand, are still shaped by market volatility, pass-through charges, and opaque non-commodity fees. In regulated industries this might fly – but in deregulated energy markets, the word fixed is often little more than a sales tactic.
The illusion works because busy finance directors and procurement leads crave simplicity. A flat number looks clean in a budget. But simplicity isn’t security. In fact, the cleaner the number looks, the more likely hidden costs are lurking beneath it.
Real Examples of Fixed Deal Failures
Case 1: A mid-market retailer signed a 36-month fixed contract. Year one looked fine. By year two, non-commodity costs spiked 18%. The supplier passed them straight through. Procurement was blindsided. Their “fixed” budget line ballooned, and EBITDA shrank by $600k.
Case 2: A logistics company agreed to a “fixed all-in” rate. Buried in the contract: a renewal clause that auto-extended them into year four at +22% without notice. Legal couldn’t unwind it. They overpaid for two years until they brought in an independent consultant.
Case 3: A manufacturing group spread across 15 sites was told a flat, fixed rate was “the only way to keep things simple.” In reality, site usage profiles varied dramatically. The supplier hedged poorly and padded the rate across all sites. The client effectively subsidized the supplier’s risk management strategy—to the tune of $1.2M over contract life.
The Supplier Playbook
Suppliers know you’re busy. They know you want budget certainty. They exploit that by offering products that look neat but are structurally tilted in their favor. The playbook is simple:
- Anchor on the word “fixed.”
- Omit the fine print in early conversations.
- Confuse procurement with complex add-ons and jargon.
- Exploit rollover inertia when renewals hit.
Without an independent benchmark, most businesses don’t realize just how much leakage this playbook causes until the numbers hit the P&L.
How to Break the Cycle
Escaping the “fixed deal” trap requires three actions:
- Dissect the contract line by line. Understand every pass-through clause, every changeable fee.
- Benchmark supplier offers. Without market comparison, you’ll never know how padded the rate is.
- Control the renewal process. Mark renewal dates early, and never let a contract roll on auto-pilot.
The key shift is mindset: stop treating supplier offers as the solution. Start treating them as data points to be tested. Procurement leaders who embrace this mindset cut leakage, protect budgets, and deliver board-ready clarity.
Get a Benchmark. Stop the Leakage.
Want to know if your “fixed” deal is actually fixed – or just fixed against you? Send us your contract. We’ll benchmark it against market reality. No fluff. Just clarity. The Energy Consultant exists to expose the hidden costs suppliers don’t tell you about – and put control back in your hands.