Supplier Negotiation

Important pointers for supplier/ vendor negotiation:

  • There are basically 3 phases: pre-contract phase, contract phase and post-contract phase. Organise your negotiating strategy around these 3 periods
  • Know their negotiating team members eg check their backgrounds on the Internet using Google and Linkedin
  • Learn as much as possible about your supplier/vendor eg their financials, customer base, SWOT, management team, business issues, investors, shareholders, competitors, supply chain, technology
  • Demonstrate your business potential – strategic and transactional. Bring value to your suppliers eg as a gateway customer, source of referral, prestige
  • Keep talking about their competitors and highlighting your BATNA.  For example, when dealing with a sole source supplier, let them know you have the ability to design their part out of your product or to make the part yourself. Always be on the look-out for non-traditional suppliers and let your incumbent suppliers know your efforts in this regard
  • Be reasonable in your price negotiation – ensure that your supplier can make a decent profit. Good suppliers are hard to find these days. Create supplier dependency on your business
  • Do not just focus on financials in your negotiation. Expand the value pie, go beyond and ask for non-financial concessions such as flexibility, preferred status, manpower support, etc
  • Reduce their risks of working with you
  • Deal at the highest level where possible. Do not negotiate with people who do not have the power and authority to make a difference
  • In B2B negotiation, it is important to record verbal agreements in writing. Document throughout the negotiation process, especially if it is protracted
  • Think strategic, think long-term. A supplier or vendor is a business partner who supports your business success. They are part of your value chain.