Negotiation on very low volume project
How do you negotiate with suppliers on a very low volume project? I want a win win situation and don't want a win-lose situation as an OEM needs supplier's support if he has to be successful.
What can be the strategies for negotiation in this scenario? (Considering overall invest viz. tool cost, ED&T, piece price)
There are three stages when this can arise. For a purchaser who regularly handles machinery purchases, it is always recommended to have a price list of the spares during the negotiation of machinery/equipment itself. This will go into the TCO of the machinery. The second stage is when something unplanned breaks and needs a replacement. At this stage, Ian's strategy is the best - identify what your win looks like and negotiate to it. It may not be as simple as it sounds, because different OEMs have different pricing strategies. The third stage is when you feel that OEMs are too expensive or too far in the deal, then you might need to break away from them and replace with third-party components/services. You need to research on this service provider thoroughly, negotiate, contractually bind them so that no counterfeit products are used, warranties are covered, SLAs for downtime period are all agreed.
Hi Sivaramkrishnan, completely agree with the feedback from Sagar and Lewis in terms of looking for other value adds. You need to have a sound strategy of what you want and a negotiation plan irrespective of the volume or spend profile. You mention you want a win-win result and not a win-lose. You should clearly define what win-win and win-lose looks like. What do you and the supplier have to offer each other? Once you understand these points and the market position you will get a result that is acceptable to you giving you your win-win.
Hi Sivaramkrishnan, the volume may be low at this moment, however if the supplier is offering any other products that might be of interest to your organization, you may discuss with supplier for future additional purchases and focus more on building strong ties with supplier looking on a longer term perspective. This way supplier would be genuine in his pricing.
Alternatively, you may do a market analysis and benchmarking and do a should cost modelling to understand if the suppliers pricing is justified or not.
Hi Sivaramkrishnan, is there anything that non-price related that you can negotiate with? Case study for the supplier? Innovation workshop? Referral to another prospect?