When dealing with a new supplier, it is vital you make the right first impression. Effective negotiation is one of the most important skills for ambitious procurement and supply chain professionals and you need to get on the front foot from the get-go.
This blog on top tips for negotiating with new suppliers will explore some of the tactics you can use to make sure things go your way. We’ll also look at approaches you can employ to build the great rapport necessary to enjoy mutually beneficial long-term business relationships.
Get to know their business
There are a number of good reasons for doing your research on new suppliers before starting negotiations. For starters, it is pretty rude to kick off a business relationship with zero knowledge of the supplier’s brand. Checking out their website should give you some valuable insights into how they work, who their key people are, the type of clients they serve, their future direction, and so forth.
Getting an understanding of the supplier’s business will also help you identify the ways you can work most effectively together and what you can offer each other. Perhaps most importantly (from a negotiation point of view, at least) your bargaining power increases in direct proportion to your potential supplier's need for your business. Therefore, getting a good grasp of their market position and where they stand in relation to their competitors is negotiation gold dust. If they have a monopoly on the market, you probably shouldn’t head in with all guns blazing. If they are one of many market success stories, you may have more chips to play with.
Make sure they understand your value
When you are negotiating with new suppliers make sure you promote your business to them as well as getting to grips with the value they offer your firm. If your business prefers to work with the same, trusted suppliers over a long time period, let them know as it might result in a better deal for you. Where appropriate, share insights about your plans for the future, and any projections that might interest them. The more you understand each other the more you can support each other in your goals. Plus, the new supplier might be able to help with networking opportunities or make introductions with other suppliers that could support your objectives.
Focus on areas where there is mutual gain
It’s likely that both parties will be prioritizing securing the best deal, financially. Rather than focussing solely on the bottom line do you research beforehand and identify some areas where you can add value to the supplier that isn’t necessarily fiscal. Perhaps there are other incentives you can offer over time, or some sort of long-term security you can give the supplier that will make them more amenable to compromise on the financial side of things.
Don’t accept the first offer
Unless it is an absolute dream deal, it’s a good idea to hold off from accepting the first offer with a new supplier. Exploring opportunities for counter offers or even asking them to get back to you with a better price should put you in a better position to make it a successful long-term partnership. In addition to the financial gains of taking this approach, you should also get a better understanding of their business, their plans and what makes them tick. By exploring a wider range of opportunities from the start you can negotiate a deal that will be genuinely beneficial to both parties now, and long into the future.
Offer a reasonable price based on a large quantity
Near the start of your negotiations with a new supplier, find out what their best price is for a large quantity. Once armed with that figure, you can for the amount you need with an offer that is agreeable to both of you. Don’t risk alienating a supplier with an offer that will trigger a loss. This rarely ends well, for either party.
Don’t make it all about business
The days of Gordon Gekko-style posturing is thankfully a thing of the past. We are all human beings and the majority of us want to have a positive experience with the people we interact with professionally. Where appropriate, why not make an effort to get to know your supplier on a more personal level? Finding a few commonalities or showing an interest in their family, where they live, or what they did at the weekend can really help to build bridges - and in a time when we are living in and out of lockdown restrictions and working hybrid or remotely, we could all use the extra positivity!
These are just a few tips on how to negotiate with new suppliers. We’d love to hear your feedback on what has worked well for you in the past so please head over to our social media feeds and let us know.
Negotiation skills are some of the most important for procurement and supply chain professionals. If you are looking for a role that will help you develop or showcase these skills, or if you are a firm looking to recruit top negotiators to your team, talk to us. We are experts in procurement and supply chain and we can help.
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