Negotiating Prices - Something different?

Originally written 18 months ago this article has become more relevant as the result of recent exchange rate changes.

Beating those price increases!!

With on-going instability as result of Brexit, increase in production demand due to economic improvement, volatile currency fluctuations and commodity index increases and the oil price stabilising and starting to climb, we are all seeing those dreaded Notifications of Price Increase!! It is inevitable that just when we are we think we have achieved some stability or are bracing ourselves for the seasonal production frenzy that we have to contend with price increases!

We say “NO” instinctively, we can’t accept any increases – our margins are eroded and Management are insistent on improved returns! BUT – we also are acutely aware that our suppliers need to stay in business too, AND we need them just at this point – we cannot afford any delivery delays – SO we compromise, meet halfway or agree “just this once!” This scenario is typical of the way that we end up negotiating, irrespective of our position in the supply chain.

And what is the outcome of these hurried negotiations? Is it win – win? Are relationships stronger as a result of it? Are service levels improved? Is there increased integrity in your supply chain? Is product specification and quality maintained? Or, rather the opposite… so often businesses lose these opportunities for relationship building and supply chain improvements because of the overwhelming emphasis on PRICE in today’s market and the net result is a deterioration of quality or eroding of service level that negatively affects us all.

Why not approach these negotiations from the perspective of VALUE ?

• What more can your supplier do for you?
• Do you understand the supplier business or processes?
• Do they understand yours? Take time to explore this.
• What commitments will they make to you?
• What improvements that can be made to make the product more economical?
• Can you give longer lead-times on orders so that they can be made more efficiently?
• Review the past 12 months and forecast the next 12 months – what will be better in your supplier/customer relationship?
• What increase in business can you offer?
• What increase in commitment can you offer the supplier?
• If certain key customers are demanding lower prices, are you able to negotiate a support package for these?

Now, negotiations on the actual product price become a lesser component of your relationship with your key supply chain partner and you are both focussed on VALUE – which lasts far longer than a hurriedly, negotiated cheap price.

Feel free to comment with some real-life experiences on how this has worked out for you.

From time to time, I am minded to share some of the experiences we have gained in contract packaging and packaging materials over the last quarter of century .(and on three different continents!) The topics will cover best practises for packaging (in the Transit Packaging field) and also proven tips that can be implemented in any operational field or Owner Managed Business. Hyper-links to other resources on the topic covered would be most welcome in the comments section below, that way we all keep learning.

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