A mill contract is more than a pricing agreement—it’s a supply chain safeguard. For a Vendor Relations Manager at a steel service center, the contract sets the terms of engagement that will define your year: pricing protections, lead time guarantees, delivery expectations, and escalation rights. Yet too often, these documents are overly generic or vague, leaving you exposed when something goes wrong.
Here’s what to lock in before you sign your next steel mill agreement.
1. Clearly defined material specifications and tolerances
Don’t assume that “cold-rolled coil” or “A1011” means the same thing to every mill. Include exact coil parameters in every agreement:
Width and gauge range
Surface finish (e.g., matte, bright, oil levels)
Chemistry standards (ASTM, SAE, or customer-specific)
Also, clarify tolerances: how much deviation in gauge, flatness, or camber is acceptable. This avoids disputes when a coil doesn’t run properly in your blanking line or gets rejected by your end customer.
2. Volume commitments—with built-in flexibility
If you’re committing to 10,000 tons annually, define how that breaks down monthly or quarterly. But don’t box yourself in. Include:
A plus/minus range (e.g., ±15%) to account for demand swings
Rollover clauses for unused tonnage (carryover for one quarter max)
Surge capacity provisions (the ability to order 10% above plan with 4-week lead time)
This structure gives you planning control without punishing you for market-driven changes in demand.
3. Lead time and delivery service level agreements (SLAs)
Many disputes arise not over price, but over missed delivery expectations. Every mill contract should specify:
Standard lead times per coil type (e.g., 5 weeks for HRC, 7 for CRC)
The latest allowable delivery date without penalty
A definition of “on time” (delivery date vs. ship date)
Also include what happens when lead times change. Do they owe you notice? Can you shift volume elsewhere without penalty?
4. Freight terms—and what happens when trucks don’t show
Freight-related delays are one of the most common pain points in service center procurement. Make your delivery expectations clear:
Who books freight—mill, buyer, or third party?
Who’s responsible for detention, misloads, or late delivery fees?
How is freight cost handled (included, pass-through, capped)?
Request a clause that requires proof of delivery (POD) submission within 24 hours and assigns liability for any shipping discrepancies.
5. Price structure tied to recognized benchmarks
To avoid price disputes, link your pricing to an industry benchmark such as:
CRU Midwest HRC Index
AMM Domestic Cold-Rolled Coil Price
Platts TSI Index
Define the frequency (weekly, monthly average) and what happens if the index is discontinued or revised. Consider a pricing band—e.g., +/- $10 per ton flexibility—to absorb minor market movements without triggering renegotiation.
6. Quality assurance and rejection handling
Outline what happens if you receive out-of-spec material:
What’s the timeframe to report defects?
Who pays for return freight?
What happens to rejected coils—credit, replacement, or repair?
Specify inspection points (e.g., visual on arrival, lab-tested if needed) and set reimbursement timelines. If the supplier offers credit, define how it applies to future invoices and how quickly it must be processed.
7. Dispute resolution and escalation hierarchy
Even the best contracts can’t prevent every issue. What matters is how fast disputes get resolved. Include an escalation map:
Level 1: Vendor manager and mill account rep
Level 2: Procurement director and mill regional manager
Level 3: VP of operations and mill VP of supply chain
Also define the formal resolution channel—e.g., arbitration vs. legal—and the governing jurisdiction (especially important if you’re buying cross-border).
8. Forecasting and planning commitments
If you provide rolling forecasts, the mill should commit to capacity alignment. The contract should specify:
How frequently you’ll update forecasts (monthly, quarterly)
What buffer they will hold for your orders
What counts as a firm order vs. a soft forecast
Add language that allows you to adjust forecasts without penalty—within defined thresholds—based on end-customer demand shifts.
9. Performance review cadence and metrics
Make performance reviews a formal part of your contract. Include:
Frequency (e.g., quarterly business reviews)
Required metrics (on-time delivery %, quality rejects, responsiveness)
A corrective action framework for underperformance
This keeps your supplier accountable throughout the contract—not just when things go wrong.
10. Exit terms and continuity clauses
If the relationship sours, or if the supplier is acquired, what happens next? Every mill contract should define:
Notice period for termination (typically 30–60 days)
Outstanding delivery obligations
Continuity clause in case of M&A or bankruptcy
This ensures a clean exit path and protects you from being left without product or support mid-cycle.
11. Confidentiality and data sharing
In today’s data-driven procurement world, many service centers share forecasts, pricing strategies, and even customer usage data with mills. Protect your business by adding confidentiality clauses that:
Limit how your data can be used
Restrict sharing with third parties
Remain in effect post-contract termination
This is especially important when working with mills that also sell direct to end-users.
12. Signature by both commercial and operational leaders
Finally, make sure your agreement isn’t just a commercial handshake. Get sign-off from the mill’s operations or supply chain leadership, not just their sales team. This ensures the people fulfilling the contract are aligned with the terms you’ve negotiated.
Final thought: contracts don’t prevent conflict—clarity does
Steel contracts should never be boilerplate. Every line item is a lever that protects your margins, delivery timelines, and supply chain continuity. As a Vendor Relations Manager, your job is to create clarity on paper—so that when things get rough, your business doesn’t feel the hit.
Approach every mill contract like a tool—not a formality. It’s your roadmap for managing expectations, enforcing performance, and minimizing risk over the full procurement cycle.
