This is an agreement for the supply of goods for business-to-business transactions.
While standard terms and conditions for the supply of goods are suitable for many ongoing supply arrangements, there may be advantages to putting a formal supply of goods agreement in place in certain circumstances.
A supplier may be keen to put a formal agreement in place for some or all of the following reasons:
- To establish long-term business continuity
- To assist forward planning of the use of product manufacturing lines
- To keep out the competition
- To cover high product start-up costs
- To allow stockpiling in low seasonal demand periods in the knowledge of sure sales
A customer will be motivated by some or all of the following:
- Bigger price discounts and rebates
- Security of supply
- Preferential ordering and delivery timescales
- Exclusivity of supply