Are you trying to negotiate a good deal with suppliers but don’t know the best strategy? You’ll be pleasantly surprised by the quality of the deal that you can get by using the correct negotiation strategies with suppliers.
57% of companies believe that good supply chain management improves their ability to compete. Therefore, you need to strike a deal with suppliers that are in the best interests of your company to ensure you get the best prices. Continue reading for insight into how this is possible.
What to Negotiate?
Before you can enter negotiations with a supplier, you need to understand the different things that you can strike a deal for – it’s much more than just about pricing. Here is a summary of the things that you should consider negotiating about other than price:
- Delivery: getting the right delivery terms ensures that you can make things much easier for your supply management, and save you money. For example, the deal could include delivery straight to your warehouses from their factories without extra charge.
- Packaging: you can secure better packaging without having to pay extra. This may require you to place bigger orders, but the size and quality of the packaging are all down to negotiation.
- Upfront payments: when dealing with suppliers you typically don’t have to pay for the entire order upfront. In many cases, you pay around 30% upfront and 70% once the goods are manufactured and about to be shipped out of the factory. To improve cash flow, you can ask the supplier to reduce the upfront payment size and even delay payment once you’ve sold the goods.
You may also want to negotiate other factors not on the list above based on what industry you’re operating in. This could be to provide lab testing certifications or other vital items for your business. The point is that there are many things you can negotiate, so think more broadly than just the product price point.
Filter Out Unprofessional Suppliers
There is no point in negotiating a good deal with suppliers who are not a professional outfit that don’t understand how business works. You need to communicate with companies that understand the basics of negotiation, why giving you a better deal might be worthwhile, and have the integrity to stick to the deal.
To filter out unprofessionals you can have a look at their company profile on the platform where you’re looking for suppliers. For example, on Alibaba.com you can see customer feedback, certifications, and the number of years they have been in business on the platform.
Also, reach out to the supplier and ask some basic questions. This can include:
- What is the MOQ (minimum order quantity)?
- Do they provide custom packaging?
- What is the pricing for different unit amounts?
Furthermore, you may want to ask more tricky questions to gauge the expertise level of the supplier. This is especially important if you’re trying to improve your product and need help.
At each step of the way, note how the supplier answers your questions. Pay attention to the quality of their English, if they are skipping questions, and the amount of detail that’s provided. It’s important to find suppliers with good communication skills, since otherwise it would be difficult to negotiate productively.
Research the Price Point
Before entering negotiations, you should research the price points of several suppliers to get a sense of the prices for your desired products. This should also include the prices of shipping, packaging and any extras you might need.
From there, you may want to select a competitively priced supplier, since that makes the negotiation process easier. Next, you can use your research as leverage during the negotiation process. That’s because you can point to cheaper suppliers and suggest you can get a better deal elsewhere.
However, you shouldn’t negotiate the price point down too hard because the best deal is where both parties leave feeling satisfied. The supplier also needs to make money, and if you’re sourcing from places like China and India, small pricing differences have a much greater impact than in the Western world.
Show Value to The Supplier
Just like you’re looking for the best suppliers in the industry, they are also more interested in doing business with top-tier companies. Therefore, you need to highlight the benefits of your company and why they should do business with you. Here are some ideas for increasing the perception of your business:
- Professional communication: make sure that you communicate with the supplier in a professional manner at all times. Imagine you were at an interview with a big bank and wanted a business loan – this is the kind of professional attitude you should bring to supplier negotiation meetings. Furthermore, you should use industry lingo to showcase your knowledge and understanding.
- Business history: if you have a long business history with many sales and a large online store, it would be wise to share this with a supplier. This indicates that the supplier can expect large orders if they provide a deal.
- Share your intentions: communicate with the supplier your business plan and how many units you plan to order. Suppliers ultimately want a large order, and if you can show them that you plan on scaling with their products, you may get a better deal than businesses you are operating on a smaller scale.
Ultimately, you have to look at things from the perspective of your supplier and imagine what they might want in return for offering a better deal. It could be basic stuff like making sure you follow through and place an order quickly instead of endless communication.
Final Thoughts
To conclude, negotiating with a supplier is an art that takes time to master. There are many things to consider and each supplier requires a unique touch to get the best deal. However, if you genuinely work in the direction of creating a long-term relationship, then negotiating a good deal with suppliers will be far easier.
Finally, it takes practice to negotiate with suppliers, so don’t expect to get the best deal right away. As you earn experience, it will become easier, and you’ll understand how to get the best outcome for your business.
