Sunset Portfolio: How to Negotiate When Volumes Are Disappearing

During a recent negotiation training for a group of experienced Commodity Managers in China, one discussion turned out to be particularly challenging – and particularly familiar to many of the participants. It's a situation that keeps showing up after mergers, acquisitions, or make-or-buy decisions: volumes are going down because production is being insourced, the supplier knows exactly why, and procurement is still expected to deliver annual cost reductions.

This situation can be described as a Sunset Portfolio. Sunset Portfolio.

What is a Sunset Portfolio?

A Sunset Portfolio can usually be recognised by three characteristics, sometimes appearing together:

• declining volumes,
• insourcing in progress,
• limited future business.

In this context, no supplier has a real reason to invest in VA/VE workshops or productivity initiatives – they know the business is disappearing. Traditional cost-negotiation approaches simply stop working, because their entire logic depends on both sides having an interest in the long-term relationship.

Why traditional approaches fail?

A classic cost-negotiation scenario assumes a shared interest: the supplier invests time and resources into improving the process, expecting the volume to stay stable or grow in the following years. In a Sunset Portfolio, this mechanism breaks down. A supplier who knows the relationship is ending has no reason to play by the same rules – and it's hard to blame them for that.

What options do buyers actually have?

During the workshop in China, participants worked through a list of approaches worth considering in this type of situation:

• Challenge the supplier's alternative – it's worth checking whether the scenario the supplier refers to is really a viable alternative for them.

• Use portfolio rationalization as leverage – decisions about transferring production from other suppliers can become part of the negotiation.

• Use contribution margin as leverage – a supplier for whom even a shrinking volume still covers fixed costs has a different reference point than buyers often assume.

• Negotiate the phase-out conditions, not only piece price – timeline, minimum order quantities, line-maintenance costs – all of this is negotiable, just like price.

• Consider aftermarket options for the supplier – what looks like a decline to us may open up a different sales channel for them.

• Escalate the conversation above sales level – in a Sunset Portfolio, the person on the sales side often has very limited room to manoeuvre.

Building a better playbook together

The Sunset Portfolio keeps coming back in negotiation trainings with buyers, regardless of industry or region – supply chain shifts, insourcing, and supplier portfolio consolidation mean more and more procurement teams are facing a similar challenge. If you've managed a portfolio like this before – what worked, and what didn't? Experiences like these, put together, are exactly the material the best practical negotiation playbooks are built from.