Tips and Best Practices for Negotiating with Manufacturers

Most people are not good at negotiating because it feels like a confrontation, when it isn’t. In fact, it’s a necessary part of business, especially if you are a supply chain manager or otherwise responsible for managing a company’s relationship with suppliers and manufacturers. Not only should you be engaged in negotiations on a regular basis, you should also engage in the renegotiation of prior agreements. Why? Because the only constant is change and the market often facilitates lower pricing.

Regardless of the industry in which you work, there are many opportunities to negotiate prices. Whether it’s with any fire tube boiler manufacturers or manufacturers of consumer products, anything purchased by a company in bulk should have a negotiated discount. If you follow best practices, this isn’t something that should cause angst. For starters, you must make it clear early on that you have the authority to send a lot of business in their direction, which is often the case if you’re responsible for negotiating prices. Manufacturers and suppliers appreciate long-term business because it tends to be the bread and butter of their operation. While you don’t want to make any promises, you should be clear about the possibilities.

During the negotiating process, it’s common to focus only on the price that’s on the table, but there are usually bigger opportunities to lower expenses. Specifically, you might be able to negotiate bulk discounts, free shipping or a tiered approach to pricing. You can also examine the warranty of large items, such as equipment, for a possible extension. Another area of opportunity that’s missed by most people is the ability to earn a discount for early payment of invoices. When negotiating any of the terms mentioned, what makes the process less daunting is establishing a positive business relationship. This is something that occurs over time and starts with the initial conversation.

It’s not uncommon for a business to have a policy regarding the acceptance of new vendors and pricing. There is often a requirement to get quotes from three different vendors when the equipment or items purchased are more than a certain dollar amount. While the price chosen is often the cheapest, that isn’t always the best decision. Sometimes the vendor with the lowest price also has the worse reputation for customer service, which can negate the price difference altogether.

Sometimes the negotiation process can feel a bit one-sided when you have the leverage of walking away from the deal. The negotiation process isn’t really about power, but about securing the best possible price for your company. In fact, the best thing to do when building a business relationship with a supplier is become the kind of company they want to work with. You’d be surprised by how accommodating people are when you’re collegial and have a desire to find a win-win solution. Another way to build a long-term and productive business relationship with suppliers and manufacturers is by ensuring all payments are made on time and communicating openly and fairly when issues arise.