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Negotiate a Partnership With Your Supplier
Date: 10/01/2013
with your best suppliers to improve the suppliers’
sales results while at the same time improving your purchasing performance. It isn’t easy to negotiate such an agreement. It takes a major effort to communicate the advantages of a true partnership that benefits both buyer and seller. A buyer/seller partnership should increase profits by improving specification accuracy, by minimizing inventory, by improving scheduling, and by reducing administrative costs.
Most suppliers are not used to working as closely with their customers as a true partnership implies. Nor are most buyers. Often neither side is willing to disclose all the information that a trusting partnership must have to obtain the bargain. Frequently neither side wants to give up what they erroneously believe is some advantage over who they feel is their adversary.
A good partnership means that each side must disclose information that was previously confidential. For example, the seller must provide cost information about materials and labor used to produce and sell the product. The seller needs to reveal overhead cost and profit figures. The buyer needs to reveal real and expected usage quantities as well as associated cost figures. Each partner may need to provide information about cash flow and capital resources.
Forming such a partnership is almost impossible with a new supplier. It takes time in dealing with a supplier to engender trust and confidence. A record of working together to solve problems is a good start. Buyers or sellers who are reluctant to communicate expectations or problems are not good candidates for forming a partnership agreement. A buyer who misleads a seller about quantities needed will not be trusted. A buyer who forecasts accurately establishes a basis for serious partnership discussions.
Large companies are more likely to work together because they understand the advantages of partnerships. Each department within each organization works together to obtain the best possible buyer/seller relationship. But small companies can do the same if they learn how to communicate properly and develop the required trust.
