Reply To: Supplier Negotiations

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Amanda Tucker
Amanda Tucker
Keymaster

Hey Kristin – you are forward planning so well! Brilliant to hear.

If I understood your question, it was related to if you should negotiate everything at once (COGS and payment terms) or negotiate one thing at a time.

The first thing you will need to consider before you go into negotiation is what is ‘the’ most important outcome for you right now? What is the one ‘metric’ which means the most to you? Not all COGS can we lowered, but payment terms are definitely within negotiation reach and help your pocket for sure!  AND, if you review the training we have on this, to get very good payment terms you may even offer to pay a few MORE cents on the COGS per unit to get better payment terms.  – that is the win-win for the supplier and you.    Just consider the value of ‘credit’.

But you can also negotiate both at the same time.   When I’ve negotiated on both pieces at once, and one metric came out more favorable than I had expected and the other was ‘moderate’.  I actually offer to pay higher COGS for better terms and they met me halfway with terms and advised that I didn’t have to pay any more COGS.

You may want to look at a few scenarios but you could present the full slate or full picture:

– You are planning to significantly increase volume and therefore need COGS to align to a significantly larger quantity;

– Considering the commitment of a production plan, you need payment terms to support the investment and sales plan.

The important negotiation tool you will have is the data and the two sets of numbers.   One set of numbers that show your standard order commitment and your NEW order plan if both COGS and terms can be negotiated.  Effectively saying that you will be unable to run the Q4 sales promotions (Prime Day, Black Friday, Cyber Monday, Christmas etc) without both pieces, which will result in a lower order.

 

All in all – it’s good to remember that negotiation should be based on ‘partnership agreement’ vs one party giving away everything to allow another party to profit more.

 

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