3 Steps to better negotiations with your suppliers
Success in negotiations is about finding common ground between you and your vendor that leads to a profitable partnership.
Step 1 – Know what you want
Is your buying decision based solely on the price? Or, are you looking for a reliable supplier who will be more of a partner to you in the long term?
When I ask purchasers these questions, the most common answer is, “No. Of course not. We also want the highest quality and the best customer service.”
It is understandable that management wants you to look for the lowest price. But, this policy might be applicable only to commodities that are easy to find just about anywhere in the city like common office supplies. But, how about those items that are more difficult to buy or require specialized technical knowledge? Is constant canvassing useful or just a waste of time?
How about the time it takes to canvass? Do you really need to keep on canvassing when you know very well that prices haven’t moved in the last six months?
The total cost of ownership of inventory is not just the cost of the item, but, includes the ordering cost plus the storage cost. You may have gotten the lowest price, but your ordering and storage cost increase may outweigh the price advantage you negotiated.
Also, you should always remember that often you get what you paid for. Low price often comes with poor quality and poor customer service.
Step 2 – Know what your supplier wants
Profit in business comes from repeat customers. Your supplier is also looking for a repeat customer. He is interested at your lifetime value as a customer. A one-time deal with you will probably not cover his marketing and selling cost. So, what concessions might he be willing to trade for a long-term relationship with you?
Other than buying in bulk, can you help him reduce his marketing and selling cost? He might be able to translate these saving into a reduced price.
Step 3 – Think win-win
Once you establish this common ground with your supplier, you should be able to see that there are many areas where you can give and take.
Your objective should be more on how you, as the buyer, can reduce the cost of selling to you so that your vendor can use this savings as the basis for giving you a reduced price.
The conversation could then be something like “If I do this for you, can you reduce your price?”
From the vendors point of view, they could be asking, “If I can get you a reduced price, what can you give me in return?”
One you get to the conditions you can both live with, you win, and he wins. You concluded a successful negotiation.
Learn more about our Purchasing and Negotiation Seminars
RMP Consultancy Seminars are available in the following formats:
- Public Seminar at our training center in Quezon City Philippines
- In-House (at your site) Workshop Format for a Max of 25 pax (Recommended)
- Special Exclusive Run
- One-on-one Coaching
Please Call Marco, Claire or Danny:
Landlines: Tel (632) 697-0767, Tel (632) 579-0233
Mobile (Globe) 0917-882-5578, Mobile (Smart) 0920-918-7358
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