Managing Your Supply Chain for Success
Part 2b of 10
We continue our Managing Your Supply Chain Series with part two of our topic on Pricing Negotiations!
As we started the conversation last week, we recognize that many folks are not comfortable talking about money, but it doesn’t have to be such a big challenge.
Since we are both a Vendor to some companies and a Customer to others, we deal with both sides of this equation.
This week, we’ll conclude with four additional questions for you to consider around pricing discussions with your Vendors:
1. Are you willing to put your cards on the table to talk about the pricing requirements for your project?
What type of negotiator are you? Do you fear “leaving money on the table” with a Vendor by providing a Target Price? If you know what you need, your Vendor will certainly appreciate having any additional information, especially about costs. Very often, having a “ballpark” idea what you expect can go a long way toward allowing a Vendor to quickly sort out whether they can meet your needs, or if your expectations are unachievable for them. Cutting to the chase with your expectations will allow you to complete the quoting process much faster. If you waste your Vendor’s time by having them quote parts when it’s clear they’re not going to even be in the “ballpark,” they’ll be less likely to provide you prices on future projects.
2. Do you think of Vendor pricing negotiations as a fight, or as an opportunity to build a Win-Win arrangement?
If you’re not concerned about having your Vendors win, they will feel it. You may have experienced a similar lack of concern when you’ve been a Vendor, and the feeling doesn’t inspire loyalty. For your business to thrive in the long-term, your Vendors also need to thrive. If either side struggles, the whole supply chain suffers. Working together to ensure that both sides can Win, will yield the opportunity for long-term success.
3. How often do you get two or more of your Vendors in a bidding war to try to optimize for your best price?
Keeping your options open to multiple Vendors can be a way to ensure that the Vendors you use are the best suited for the work. Obviously, each part is different and each Vendor is different, so checking with more than one Vendor can give you options. However, playing one against another, just to drive pricing down, will cause frustration for all involved. Beating up your Supply Chain ultimately reduces their ability to be effective for you and is likely to get you the Vendor most willing to reduce their pricing, rather than the Vendor that can provide the best value.
4. Do you treat your Vendors differently than you’d like to be treated by your Customers?
If you were asked how your Customers could be more helpful to you as a Vendor, you’d quickly come up with a long list of things they could do to make your life easier as their Vendor.
Unfortunately, if you were then asked to review that list and see how many of those things you do for your Vendors, you might discover that you’re not doing them. The Golden Rule certainly applies; if you set high standards for the way you treat your Vendors, they will perform better for you.
Your company probably has different people dealing with your Customers and with your Vendors. Your Customer Service group can always use more help from your Customers, even as your Purchasing group could be pounding on your Vendors.
Ultimately, if you can set proper expectations with your Team to drive for maximum value, both up and down the Supply Chain, you’re more likely to have greater success for all involved.
Hopefully, these additional four questions continued to challenge your thinking in regard to talking pricing with your Vendors to maximize the value you receive from the parts they provide. Your openness to put your cards on the table when talking pricing, seeking Win-Win agreements, avoiding bidding wars, and treating your Vendors as you’d like to be treated, will help grow your Vendors into solid Partners.
Pricing negotiations with Vendors still might make you uncomfortable, but hopefully we’ve given you enough food for thought to adjust your perspective as you seek to build Partnerships up and down your Supply Chain.
Next week, we’ll discuss the challenges of Vendor Communication!