If you are a buyer or purchasing manager for business, which of the following ways do you buy MRO items (maintenance, repair, and operating supplies)?

Buy only when immediately needed.
Buy expected amount needed for a month or two.
Buy amount depending on cost and price breaks.
Allow suppliers to estimate our needs and buy and store that amount.
Have supplier store amount for us that we use in a reasonable time.
Store amount by item category depending on cost and usage.

Now is the best time to negotiate. It is easier to obtain concessions from existing suppliers when the e..." />

Shop and Negotiate Now

Date: 01/01/2011

Now is the best time to negotiate. It is easier to obtain concessions from existing suppliers when the economy is depressed and from new suppliers to make the best offers when they are hungry for new business.

For many items prices are down or steady. Inflation is relatively low except on certain products. Because the economies are down in other countries as well, they too are more willing to negotiate and offer attractive bids. Both domestic and international sources will be less willing to do so as business improves.

Present suppliers are not likely to offer price concessions without being asked to do so. They are reluctant to reduce their prices voluntarily which will only cause them greater financial pain than they are already experiencing because of a lower sales volume. On the other hand, there is a good probability that they will see the necessity of agreeing to a lower price because of some slight arm twisting.

To be successful, a buyer’s request for a price reduction needs to be supported by facts. Justification should be based on the availability of better pricing from the competition. However, a supplier should never be told what prices were received from another supplier, nor should the buyer indicate that lower prices were received if that were not actually the case. Other justification for lower prices derives from internal cost reductions made by the supplier. Many companies have laid off employees, cut back salaries, and made reductions in expenditures. The result has often been large increases in company profits.

Buyers can sweeten deals by offering long term purchase agreements based on needs. Suppliers thus obtain a certain amount of security from guaranteed business. Each negotiation should be planned based on what the buyer must have, what the buyer can afford to give, and what the particular seller would like. The best results may take days, weeks, or months, but taking too long to conclude an agreement will mean the business climate has changed and a better deal will no longer be possible.