Supplier Negotiations - Creating a win win

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Supplier negotiations usually looked as a Zero Sum game, so for the buyer to win, supplier have to lose. However that approach usually leads to short term gains and long term pains.

As procurement and sourcing organizations matures, they realize fast that negotiations which creates a win win situation goes a long way to deliver value for both organizations.

So how do you go about creating a win win situation or increasing the pie so that you can find the middle ground.

Reducing the Inspection cost:  Generally the inspection of the goods happen before the leave supplier warehouse and after they are received at the buyer end. Transfer of the responsibility for quality assurance back to the supplier can usually be done without any additional risk of non-conformance. Doing this will reduce and/or eliminate the OEM Receiving Inspection costs. It also has the potential to reduce OEM Receiving costs. When either of these things happens, this increases the size of the pie.

Overall Inventory reduction: By working closely with your suppliers, you can plan better delivery schedule, hence avoiding the need for large inventory.Though there might be increase in shipping cost, however usually the gains from Inventory carrying cost reduction is more than enough to offset that cost and deliver savings.

Supplier development: Working with suppliers to improve their processes or for that matter offering additional support around planning,planning software etc can go long way in supplier overheads and hence lower cost for you.


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