You're sourcing critical product components. How do you secure the best pricing from external vendors?

In my experience, implementing tier-based commission levels, along with offering free traffic as an introductory benefit for new vendors, fosters trust in the platform. This approach encourages vendors to provide the best possible prices for the end user.

What I found helpful in our own R&D is to (1) understand our own strategic business goals (short term/medium term/long term), (2) know our customer’s needs, wants or challenges, and (3) understand where we want to be vis-a-vis our competitors. If we were trying to make a product to be the FIRST IN THE MARKET, price was less critical because our goal was to create a new market. Similarly, if we are late to the market but want a product to be the BEST IN THE MARKET, then price was more critical since we are competing against an existing line of products. This is what determined flexibility in price. I have always found it helpful to bring vendors on board with our strategic goals through NDAs and build win-win pricing.

First step is defining elements of cost viz. price for regular supply, tooling cost whether it’s paid directly or indirectly, warranty costs, other direct and indirect costs. Estimation of overall cost for such products over product life is crucial. Sometimes some suppliers do overcommit to gain business and then discover that price is just not remunerative. Thus, one should be wary of prices lower than the market levels . In such cases it is prudent to secure supply chain by having second source even if it is higher price but at lower market share. With serious blips in supply or Quality start adjusting market shares. Another very vital aspect is demand for same products from other industries eg semiconductor crisis of 2019-20.

Creo que el termino proveedor esta bien pero realmente somos socios comerciales, y esa relación es la que hace un compromiso desde obtener mejores precios, tiempos de entrega, y por parte del cliente el pago en tiempo y forma de este servicio producto. El compromiso es de ambas partes. La confianza se cultiva con el tiempo y una relación estrecha de compromiso en ambos sentidos.

Market research is an indispensable step. While it’s crucial to research the pricing of components and compare them across different vendors, this is only part of the equation. Selecting a vendor based solely on cost can sometimes be short-sighted. It’s equally important to thoroughly vet the vendors themselves. Consider the vendor's reputation in the industry, their track record with previous clients, and the quality of their products or services. Assess their reliability in terms of delivery timelines and their responsiveness to inquiries and issues. Take into account the vendor’s financial stability and ethical standards as well.

Any commercial related business plan, must start from the market assessment! Understanding the source of need, going into the available market solutions, then analyzing the gaps which will be the opportunities to tackle for the best results. This understanding allows you to position yourself in the most optimum shape.

One of the most effective strategies to secure best prices from an external vendor is to let them know that it is an open brief - where you have reached out to multiple parties with the same requirement. This ignites a competitive mindset within the particular vendor and she/he works towards an offer that is more palatable. Of course, you need to know the market rates of these particular components or relevant substitutes so that you have an idea of the benchmarks.

Negotiating volume discounts can be a powerful strategy to reduce costs. If we expect to need large quantities of a component, we can ask suppliers for bulk pricing, as they often offer discounts for larger orders. However, it's crucial to balance our order size to avoid excess inventory that ties up capital. Consider the inventory turnover rate and storage capacity when discussing volume discounts to ensure we don't overcommit and miss out on significant savings. This approach helps us maximize our purchasing power while maintaining efficient inventory management.

Considera acuerdos de suministro a largo plazo para asegurar precios favorables y estabilidad en el abastecimiento. Evalúa la demanda futura con precisión mediante análisis de ventas y previsión de tendencias del mercado. Esta estrategia permite maximizar ahorros sin comprometer el flujo de caja ni el espacio de almacenamiento.

Descontos por volume: Exemplo: Se você está comprando a?o inoxidável em grande quantidade para a produ??o de equipamentos industriais, negociar um contrato de fornecimento de 12 meses com compras mensais pode resultar em um desconto de 10% em compara??o com compras esporádicas.

Cultivating strong supplier relationships is essential for the success and sustainability of your company. Strong supplier relationships can lead to better pricing, improved quality, reliability, and shorter delivery times. By having a Long Term Relationship with the vendor, you will help to develop cost savings and reduce availability problems, quality issues, and product delays.

Relationships are build between 2 parties or more. While building long term relationship with vendor, it is crucial to understand value from vendors’ perspective too. Understanding their value, priority and capacity you can identify a common goal and strategic alignment to build the relationship upon. This way, you can foster a sustainable long term relationship with your vendors.

Building a long-term relationship with your supply chain partners requires commitment, communication, collaboration, and adaptability. By fostering transparency, fairness, innovation, and technological advancement, businesses can cultivate enduring partnerships that drive mutual success and sustainability. A long-term relationship between supplier and buyer allows for the free-flow of feedback and ideas. Over time, this will create a more streamlined, effective supply chain that could have a positive impact on both costs and customer service Long-term relationships with suppliers mean they understand your standards and expectations. Cost-Effectiveness: Over time, suppliers are more likely to offer better pricing to loyal customers

Establishing long-term relationships with vendors can significantly enhance pricing over time. When suppliers perceive you as a loyal and consistent customer, they are more inclined to offer favorable pricing to sustain the business relationship. Clearly communicate your intention to build a partnership that extends beyond individual transactions. This strategy can also result in improved service, priority treatment during high-demand periods, and access to more advantageous payment terms.

In competitive world tacit knowledge gives edge to any product, while broader knowledge is rather easy. Tacit knowledge increases with daily experience about Product performance and newer expectations. Lateral industry insights also provide many inspirations. Under such an environment, a long term relationship linked to knowledge sharing rather non business critical knowledge sharing can be a great lever for long term partnerships. This would be beyond financial transactions. However trustworthy relationship with mutually respecting actions is the foundation for all relationships.

To get the best pricing from vendors, I've found that strong negotiation skills are key. First, do your homework and know the market prices. When you talk to the vendor, be clear about what you need and understand their constraints too. Highlight the potential for long-term collaboration to sweeten the deal. By being prepared and fair, you can secure great terms and build solid relationships with your suppliers.

Employ strong negotiation skills to secure the best deals. Be prepared with data from your market research and understanding of your needs. Highlight your commitment to a long-term relationship and volume potential, and be willing to discuss terms that can benefit both parties. Effective negotiation is about finding a win-win solution that ensures you get the best pricing without compromising on quality.

To be effective at the negotiation table in the apparel industry, it's crucial to have a deep understanding of the apparel supply chain. This includes costing, production lead times, shipping, and logistics costs. You can negotiate separately with component vendors such as fabrics and trims and then specifically negotiate cutting and sewing costs with the production factory. Afterward, you can select each component vendor and have the factory coordinate and place orders. The sewing factory should serve as the primary producer. This approach allows you to have complete visibility into every cost involved.

Negotiating efficiently with supply vendors is paramount to a company's success in ensuring customer satisfaction and maintaining a healthy bottom line. Supply vendors play a pivotal role in providing the essential materials and resources that enable your business to deliver quality products and services It can prevent a conflict from escalating by using "preventive diplomacy" It can open wide new areas of interests to both parties by expanding the “pie” It improves communication maximizing the odds of a positive outcome It allows parties to tailor the decision to their own needs It works just as effectively in complex and simple daily disputes It can be used for resolving a dispute or making a deal

Is there any win-lose negotiation to talk about a win-win one? Nobody comes to table to lose. So, I think the mindset should be a better win for both. We negotiate to make better relations. Then, how critical is this component, is it used in aeroplane or a juicer? What is the purchase volume and payment terms? Is it an old or new supplier? Who is the powerful party in negotiation? One should also be well prepared about: technical requirements, cost, margin, supplier history, & market trend; Making a list of strategies for various negotiation senarios might be helpful. Possibly indicating how a lower price can beat our competitors and accordingly increase our supplier's market share can be encouraging.

If it’s indeed a critical component to your product, it’s important - as much as possible - to not be reliant on one supplier. In the pharmaceutical industry that can be a challenge, because any change in manufacturing specification, can trigger a requirement to inform regulators and at times, take months or years, to get approvals to be able to market the revised product (even if the change is innocuous). Thus, in negotiations, you need to ensure that any contract does not bind you to one party, or at least gives you freedom to seek other sources in certain circumstances (eg if quoted prices rise by xx or if the supplier cannot meet certain timelines or quality requirements).

Evaluate Total Cost of Ownership: Consider not just the initial price but also factors like shipping, maintenance, and quality. Look for Added Value: Seek out vendors who offer additional services or benefits that add value beyond just price. Optimize Component Design: Collaborate with vendors to explore design changes that could reduce costs without sacrificing quality.

I would add that we always strive to source more than one vendor. Things can happen, and to mitigate risk, it’s crucial to work with multiple vendors who can deliver on time and meet specifications.

To be honest there’s nothing called as best pricing as there will be some one having a much better pricing than your vendor. Here comes the value analysis which allows you to look at critical aspects in much deeper way which surely just not cost based. Beyond pricing is delivery critical? Do you want your vendor to keep some safety stocks? These are some aspects of value mapping which will allow you to bring win win situation for both you and the vendor.