[Supplier] What do you do when a supplier says they cannot meet the original terms anymore?

I would first find out whether this is a temporary disruption, a structural change, or a negotiation move. The answer matters because the response is very different if the supplier has a short-term capacity problem versus a long-term economics problem.

Then I would make the tradeoff visible internally. If the supplier is asking for more time, more money, or looser service expectations, the business needs to see...