The Art of Negotiating with Suppliers

The art of negotiation comes in useful in many different areas and skilful negotiators will be able to get the very best deals with suppliers leading to larger margins and more profits for your company.
Here are a few tips and tricks to remember when negotiating with suppliers.
1 – Always try to research the costs of the product – if you know how much of a mark-up your supplier has then it can help you to know if you are really getting a good deal.  If you know the manufacturing costs it puts you in an even  stronger position for negotiation.
2 – Build a rapport with your suppliers in order to negotiate the best deals – be attentive, listen well, respond to any issues they have and work on communication. The better working relationship you have with your suppliers the better arrangements you will be able to negotiate.
3 – Find areas of mutual gain – if you supplier stands firm and won’t budge on price focus on other areas instead. This could be the payment terms, down payments, length of warranty, discounts for volume purchases etc. If you can come up with something which benefits both parties you’re on to a winner.
4 – Get quotes from at least three suppliers – and let each of the suppliers know that you are soliciting quotations from other vendors. This will encourage them to price more competitively at the beginning of the negotiations.
5 – Do a little research so that you have a target dollar amount per item. Based on the volume of the requirement you should be able to improve your unit costs. Advising a supplier on a requirement for a larger volume of product will improve unit cost.
6 – Ask your suppliers for some of their current customers so that you can reference the exact product type you want. Their customers may be willing to discuss certain commercial aspects which will give you a good starting point in your negotiations.
7 – If you really want to have some leverage when you are dealing with suppliers have a chunk of a deposit ready and waiting – many companies won’t be able to resist the lure. If you have say 50% or even 70% deposit waiting for a relatively large order you’ll be in a position of strength. The higher deposit you have the better price you will be able to negotiate.
8 – Don’t appear too keen – often deals end up going to the person or company which wants them the least . . . or at least that’s the way they make it appear. It is important to be vested and interested in the offer just do not be a keener and as always make sure you have a Plan B just in case things start to go sideways on you.

These are just a few of the techniques you should bear in mind in order to get the very best deals when negotiating with suppliers.

Filed under: Negotiation

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