Negotiation with suppliers — procurement tactics and contracts
How the basic course and main course flow together into three routes
As a purchasing assistant you spend a large part of your time negotiating with suppliers — about price quantities delivery time and terms. A negotiation you go unprepared into almost always ends up more expensive than it needed to be.
§Preparation is half the victory
Before you sit down at the table, you must know your own needs in detail: which quantity, which quality, which delivery time and which budget. Also explore the market — what do comparable goods cost from other suppliers and what is normal delivery time in the industry. The more you know in advance, the harder it is for the other party to surprise you.
- 01Know your own goal and your pain point on price, quantity and delivery time
- 02Investigate alternative suppliers so you have a real comparison basis.
- 03Clarify internally who has the mandate to approve the final agreement
- 04Prepare your main arguments and the questions you expect to get
§Know your alternative before you negotiate
A key part of any negotiation is knowing what you do if you do not agree — your best alternative to a deal. If you have a solid alternative, you negotiate from a position of strength because you are not forced to say yes at any price. If you have no alternative, you should consider whether you are ready to negotiate yet.
§During the actual negotiation.
Listen at least as much as you speak and avoid revealing your bottom line too early. Ask the supplier why they price as they do — sometimes there is room to negotiate on more than just the price itself, for example payment terms, volume discount or delivery terms if the supplier cannot give more on the amount.
§What must be included in the contract
- 01Price, quantity and any bulk discounts
- 02Delivery terms, preferably with a specific Incoterms clause and named place
- 03Payment terms and payment deadline
- 04Rules for complaints and delivery defects
- 05Notice to terminate and what happens in case of breach
A verbal agreement is only as good as the two parties' memory. Always get the key points down in writing even if you've been dealing with the same supplier for years — it's precisely those agreements nobody wrote down that create disagreements when something goes wrong.