These are tough times to be in business. Costs are rising but selling prices are not, mainly due to global competition. The arithmetic is simple: profits are being squeezed. Finding ways to drive down costs lower than your competition's has become more important than ever – but value and customer service can’t be ignored either.
I like to take an approach to supplier negotiations that I believe will help you gain an edge in these tough times. It starts by finding an answer to the ‘procurement conundrum’.
Many procurement pros are handicapped by having to wear two hats:
First there's the tough-negotiator hat. Driving down costs is a fundamental part of the job; that's why we spend so much time negotiating.
Then there's the good-relations hat. Production requirements and customer needs are constantly changing. Procurement needs suppliers to react quickly to fluctuating demands. As a result, we need to cultivate give-and-take relationships to make sure this happens.
It's easy to see how the two ‘hats’ conflict. Imagine phoning a parts supplier on Friday to coax him into running an unscheduled weekend shift, then on Monday asking for a better price. It’s hardly a recipe for long term success.