Your bottom line depends on your ability to negotiate with your suppliers. But that doesn’t mean the only thing you should be negotiating is the price. Every time you step into a negotiation that directly affects your supply chain management, you are looking for the best possible terms in every arena: delivery times, payment terms, quality of guarantees and more.
You also want to ensure that both parties are happy with the deal, too.
Here are some tips on negotiating the best deal — for everyone:
Considering Your Supplier’s Side
Research is an essential step before negotiation begins. How many competitors do they have? How large are they? How many resources do they have? What are their sales quotas like, and when do they need to be met in the billing cycle? What kinds of deals and what kind of prices are other similar customers being offered?
Knowing these things not only helps determine how flexible their terms are likely to be; the power you have at the negotiating table is directly affected by how much you know about their business, and how much they need yours.
Setting Objectives and Developing a Strategy
Now that you know as much as possible about your supplier’s position, you need to consider yours. Set clear goals, and decide now where you will draw the line, and what will make you walk away from the table.
What points are essential to you: Priority shipping? Guaranteed prices? What are your priorities - is it cost, or timing, or quality? What are you prepared to compromise on - and what can’t you budge on? What overall outcome are you looking to establish? An ongoing relationship or the lowest cost for a one-time deal?
Preparation is key when you’re in the midst of a deal.
At the Bargaining Table
You need to make clear what parts of their deal you’re happy with, and what parts require discussion. And then ask the supplier, before they respond to your points, to indicate their own perspective on the deal as it stands.
Early in the negotiation, you don’t want to reveal that there are specific points you’re willing to either concede or compromise. Revealing your position too soon will lose you any upper hand you have.
As you negotiate, remember that your supplier is likely to employ common techniques and be prepared for them. References to urgent deadlines, other pending deals, a higher-up they need to clear your terms with are all pressure tactics. Also be aware of prices set artificially high in order to make you feel that any drop in the price is a great deal. Never feel forced into agreeing with a condition you are not satisfied with. And every time you establish an important point, clarify it and then put it in writing.
And when you’re negotiating price specifically, consider these tips:
- Don’t accept the first offer, and make a low counter-offer in return. They’re likely to revise their initial offer significantly.
- Ask what else their price offer can include, along with the original item
- If the price is surprisingly low, find out if that offer really includes everything you want and need, and if the goods you’ll be getting are actually the quality you need
- If the price includes things you don’t need, ask to remove them and lower the price
- Consider asking for bulk discounts if your orders will be sufficiently high
- Don’t push the price too aggressively low or use pressure techniques of your own.
Signing the Contract
Once you’ve hammered out the terms, you need to do a little more research. Does your potential supplier actually have the cash flow and resources to provide what they’ve agreed? Also ensure that you’re happy dealing with the person who will be assigned as your permanent contract, whether it’s the negotiator or another employee.
Your contract should include all the terms you negotiated, including payment terms and delivery schedule. And it should protect your interests by keeping liability for problems in product quality or delivery firmly on the supplier’s side. Have the contract reviewed by a lawyer who can catch potential pitfalls and make sure you don’t end up agreeing to terms that aren’t as precise and clear as they should be.
Negotiating from first contact to signed contract is a tricky, often long-term project that has major impact on your time, your resources and your bottom line. Consider partnering with professionals who have the negotiating expertise and supplier insight you need to always get the best deal, every time. Give the experts at IntegraCore a call at
800-410-7555 for more information.