Why is it generally a BAD idea especially for the supplier t

Why is it generally a BAD idea, especially for the supplier, to enter into a long-term agreement that is based on fixed-pricing?

Solution

It is generally considered to be BAD idea, especially for the supplier, to enter into a long-term agreement that is based on fixed-pricing, because in long-term, there could be virtually a complete change in a scenario which the parties, especially the supplier, may not be able to foresee currently. If such unforeseeable circumstances turn out to be more favorable to the Supplier in future, then such a Supplier would fail to seek the benefit owing to the agreement based on fixed-pricing for a long-term. The opportune earnings that could be possibly made in the future depends upon various factors such the prevalent economic state of affairs at that point of the time, the political condition of the place, the demands of the consumers and the overall trends in the market. Not all of this could be predicted in the present and hence some level of flexibility could give an assurance to the Suppliers about the potentiality of better income generation in a long-run. Locking themselves to a fixed-pricing may hence be a BAD idea because it only calls for rigidity.