Negotiation Archives

Supplier Negotiation

Negotiating with Suppliers (8) General Points

The art of negotiation comes in useful in all aspects of life and is a skill many people struggle with. If you are an Agent or representative of a company, this is one task you should embrace and make every effort to develop. There is no question that skilful negotiators are able to achieve the very best deals with Suppliers which can lead to improved margins and profits for your company.

Here are a few tips and points to consider when you find yourself negotiating with Suppliers:

  1. Always attempt to research the “should be” costs (more on this in an upcoming post) of the product you are dealing with – if you know how much of a mark-up your Supplier has then it can help you determine whether you are in fact receiving a good deal.  Better yet, if you understand the manufacturing costs it puts you at an even stronger position when it comes time to negotiate.
  2. Build a rapport with your Supplier’s. In order to negotiate the best deals – be attentive, listen, respond to any issues they have and improve communication. The better the working relationship is with your Suppliers, often better terms will be negotiated.
  3. Find areas of mutual gain – if your supplier stands firm and won’t budge on price then it might be time to focus on other areas instead. For example,  payment terms, down payments, length of warranty, discounts for volume purchases, discounts for contract extensions, etc. If you can come up with something which benefits both parties you are onto a winner.
  4. Get quotes from Read the rest of this entry

vinny02Negotiating aka haggling does come easier for some people. For example, my parents are from Europe and although I was born and raised in North America, my family was comfortable negotiating on both major and minor purchases.  This was part of their upbringing and they are more accustomed to this form of trade or commerce. As a result of having witnessed this growing up they managed to instill these traits in all their children.

Looking back, after over 30 years in the Materials Management field, I have come to realize becoming a Purchasing Agent had much to do with my upbringing.  My parents used every opportunity to expose their children to real life financial transactions and nurtured the importance of achieving the best possible product at the best possible price. To be honest, for our family, negotiating an acceptable unit price on a major expenditure was a necessity.

One of these real life transactions — my Father had me actively involved in the negotiation of my first major purchase. An automobile and at the tender age of 16. Yes I had a car, which I bought and paid for with my own hard earned cash!

Watching my Father grind the Car Salesman sitting on the other side of the desk was an experience or life lesson I will never forget. On one side you have an eager yet scared Buyer (me cause I had to make car payments), on the other side is the wily sales manager. Representing the eager buyer was Read the rest of this entry

Part 2 – Buyers Guide to Cost Savings

Our last post on spend analysis was part 1 of our cost saving series and we are going to stay focused on this topic by providing areas to save money both within and outside of your organization.

We noted the importance of going after your class “A” Vendors or your top 20 which account for 80% of your spend. This is our target list and we will review how as a Buyer you can better leverage your vendors experience to help you generate cost savings.

In this scenario, your pricing on products you purchase is acceptable and lets assume they are under contract. Now where do you turn to find the next round of savings? More cost savings can be found in your suppliers’ organization. Pardon…you want me visit my suppliers and tell them what they can do to reduce costs so I can get a better deal? Not at all, we are suggesting you get into the heads of their technical and support staff to mine their knowledge, experience and ideas.

Your Vendors are in an excellent position to help review your processes and reduce your costs for the following reasons:

  1. They have a long list of clients which use their product and have experience and knowledge of potential best practices. This can be useful information. While asking vendors to divulge proprietary information is not appropriate, you can ask for suggestions on what we can do better. Keep in mind Vendors would rather you seek cost savings elsewhere versus from their pocket so they should be quick to jump on this approach.
  2. The technical knowledge of their own products. There is no better source to suggest alternative specifications or practices which can reduce expenses without sacrificing quality.
  3. They are a known entity.

How do you approach this? Read the rest of this entry