The Supply Agreement

25 January 2011

With the introduction of a supply agreement between two companies, a formal business relationship is established. This is the first step in a formal relationship that must take place before any exchange of goods or services for payment to be made in the future.

Before there can be a supply agreement, there are several steps that must be taken first. This process all begins with the creation of the Request for Information on the products and services that will be required by a business to operate in the creation of a project. To find the right third party vendor for this, many RFIs must be sent out.

Once the RFIs are received by the sending company, the next step towards a supply agreement can be made. This is the decision on which third party vendor is to be selected for a possible business relationship that might be established.

As the third party vendors are selected for the many different components that are required by the company to run their business and projects, the Request for Proposals are to be sent out. This will give the framework for the supply agreement to be established by the way they are worded. The responses to this set of requests will lead to the next step.

This next step in the supply agreement is to draw up this document so both parties that are involved can review and make the necessary adjustments, so each side of the agreement is satisfied with its content. This has to include the item itself, the quantities of the items being ordered, the price of each item, and any discounts for bulk purchases. Also included will have to be the delivery of the items. Some companies charge for this while most do it for free as part of the purchase of the items.

The last part of any supply agreement is the actual delivery time that is set on the transaction to occur, along with the payment schedule. With all of this in place, then a supply contract can be signed to make the transaction a legally biding business arrangement.