PurchTips edition #355

When negotiating with sole source suppliers, you need a different negotiation strategy than you’d use in competitive situations. That negotiation strategy requires that you learn what the supplier’s interests are, probe for latent cost savings opportunities, and try to discover ways to create mutual value. Your findings can position you to make the negotiation more of a collaboration, where you team up with the supplier to brainstorm ways to maximize the benefits for both parties.

At the center of any good sole source supplier negotiation strategy is a series of questions. Those questions should extract valuable information that you can use to structure a great deal with the supplier.

Based on a recent on-site training session I conducted alongside Dr. Soheila Lunney, my co-author for our book The Procurement Game Plan, here are some questions you can ask a sole source supplier in the context of a negotiation:

• Why do you want to do business with us?
• What good things are your other customers doing that we’re not doing?
• How much does the timing of our commitment matter?
• How does the duration of the contract impact your flexibility with the price?
• How do our specifications or other terms impact your flexibility with the price?
• What creative ideas do you have for us to do business more cost-effectively?
• What can I do for you to bring value to your company?
• What are examples of invoiced line items that some of your customers have referred to as “hidden costs?”