4 Strategies for Negotiating with Supplier During an Inflation
Posted on: 7 June 2022 by Fazal Sayyed
Market inflation is not a new phenomenon in the business cycle; it has existed for centuries. With the return of inflation, price negotiating becomes a more demanding—and strategically important—capability.
Here are some bargaining methods for dealing with inflation.
1. Make use of the relationship.
Take advantage of your long-established strategic sourcing and supplier relationships that have endured the pandemic's risks. Carry out the uncomfortable discussions on cost, pricing, and value. If prices must be raised, look for balancing savings in other areas, such as improved ordering efficiency, a change in payment terms, consignment schemes, early supplier participation possibilities, or offsetting reductions on more stable goods. Approach the negotiation from all angles, rather than simply the price.
2. Create a Longer-Term Commitment.
During inflationary times, suppliers have more freedom to pick their clients. By committing to a long-term arrangement, you may increase your importance to your provider. You may also strengthen the connection by collaborating on shared process enhancements aimed at decreasing waste or increasing yields.
eAuction are live, online talks between one buying firm and a number of pre-qualified suppliers bidding for the purchaser's contract. Procurement professionals may utilize eAuctions to interact and negotiate with more suppliers in an organised manner, eliminating the need for time-consuming one-on-one meetings. They are significantly more convenient than traditional conversations and negotiations in that they provide procedure integrity and openness while also decreasing final prices due to increased supplier competition. eAuctions nearly always ensure that businesses receive the greatest price for their goods and/or services, regardless of whether the market is expanding or contracting.
4. Negotiate Early Discounts and Incentives.
Almost all suppliers anticipate being able to boost prices in 2022. While all organisations must exercise caution when negotiating with key partners at this time, you may utilise the incentive of more business by combining volumes to negotiate advantageous rates because it is a seller's market. Request discounts for preordering, paying in advance, or purchasing in bulk. In businesses where rebates and future discounts are typical, such as managed service or software implementation packages, fight for that value to be achieved and exhibited upfront through a sign-on or incentive bonus. This will enhance the value of the discounts by guarding against further inflation. Include claw-back clauses in contracts with suppliers who are concerned about the possibility of failing to reach predicted order quantities.