Eureka Case 25 min Operations

The Contract That Renews Itself

You are Corinne Vásquez, Senior Category Manager for logistics at Cumberland Health Brands in Nashville. It is Tuesday 12 May 2026. In ninety days the contract with your largest supplier renews itself automatically, and before then you must decide what kind of relationship you are going into the negotiation to fix.

The situation

Cumberland Health Brands (CHB) books US$820 million a year in vitamins, supplements and personal care, sold to national drug, grocery and e-commerce channels. It is asset-light: it owns formulations, brands and customers, and outsources nearly all warehousing, fulfilment and transport. Apex Logistics Solutions has done that work for nine years, for US$64 million a year, CHB's largest indirect spend. The contract pays for activity: a rate per pallet stored, per line picked and per shipment, plus a service-level schedule backed by penalties.

Peak season has just ended badly. Apex shipped complete on 88% of order lines against a contractual target of 98%, and customer chargebacks plus expediting cost about US$3.1 million in the quarter. A year ago Apex's own engineers scoped a warehouse-automation project that would cut billable picks by roughly 18%; it is still unfunded. At current rates it would remove about US$4.8 million a year of Apex's revenue on the account. Last Friday the CFO, Hollis Pruitt, asked for 12% out of logistics — US$7.7 million of run-rate savings within eighteen months — and a credible plan in six weeks.

Your VP of Procurement, Dinah Okoro, handed you the category with one instruction: fix the relationship or replace it, and say which by the renewal date. Sasha Lindqvist, Director of Distribution Operations, spent peak season on escalation calls and wants a re-bid. Okoro warns that a re-bid is real but expensive: nine to twelve months of transition, US$6–9 million of switching cost and service risk on the e-commerce accounts. Warren Teague, Apex's account executive for four years, can price that as well as you can. Your own bonus depends on delivered savings and on a service metric you do not control.

Teague has asked for a meeting next week. He wants to know what he is coming to discuss.

Your job in this case: read the evidence, test what each route can deliver against the CFO's number, and decide what kind of spend the Apex contract is — the classification everything after it will hang on.

The decision

How do you classify the Apex contract going into the renewal?

  • A · A strategic relationship to redesign
  • B · A transactional spend to optimise
  • C · A failed supplier to replace by re-bid

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