How to negotiate the best deal with a product vendor

If you are considering getting a new supplier, chances are that your previous one made mistakes or overcharged you. Keep in mind that a new one could do the same.  However, if you don’t shop around, you’ll never know.

To make your vendor selection process more structured, here is a basic step-by-step guide on negotiating prices with vendors when sourcing supplies or other basic products that are sold in a competitive market.

1. Decide what products you want to source

   Make a list of things you need now and what you may need over the next few months.

2. Weigh cost vs. convenience

   If you are looking for a wide array of products, then it’s likely that dealing with multiple suppliers can get you better pricing, but would also require more work. You must decide whether you want to work only with full-service suppliers that can get you all the items, or if you prefer to work with several suppliers, each getting you only part of your total needs but possibly at lower prices.

3. Decide if your requirements are brand specific or generic

   Keep in mind that replacing a product that is proven to work well might be time-consuming and expensive. There’s a risk you’ll spend money on something that doesn’t work and end up stuck with it. The upside of being open to alternative/equivalent products is potential savings and more supplier diversity if they truly end up being equivalent.

4. Find several potential suppliers for each product

   It’s a good idea to keep your current supplier on that list as well. To have meaningful results, aim for three suppliers per product.

5. Call suppliers (including current) and get quotes and terms

   At this time, your evaluation of their customer service starts – you want to pay attention to whether they respond fast, whether the information they provide is correct and full, and whether they are familiar with the product they sell. You are also letting them know that you are shopping around for a good deal, pressuring them to provide competitive pricing.

6. Email your product list to each supplier and get pricing

   Specify whether you want exact products you list, or if you are open to getting equivalent/similar products. Ask if there are specific rules on ordering – minimums per order, minimums per item, shipping cost treatment, and taxes. Ask for lead times that you can expect on each item (and compare them to the real lead times that you require).

7. Figure out how supplier pricing works

   Once you get the pricing back, ask the suppliers whether they work with across-the-board discounts, or if you’ll need to quote each item prior to each order to get the special costs. It is possible that they work on a quote basis only, meaning that each order or each new item will take significant effort on your part, as you’ll need to confirm the prices every time. It may be worth it, depending on how much money you spend.

8. Compare apples to apples

   Once you get all the replies, you’ll be able to compare prices and promised lead times. In addition to that, you’ll also gain a feel for the customer service that the suppliers provide – did they reply quickly and fully? Or did you get inadequate or delayed responses? Did somebody not respond at all?

9. Further vetting

   If you think it’s relevant, you can ask a few technical questions about the products. See if they can help when you need it and use this criterion in your selection. Don’t test tech support simply to check – decide if it is important to you.

10. Start buying what you need!

    Hopefully you have a clear winner. It may be best to first order a few items to simply to test performance, especially if you decided that you’ll accept some alternative/equivalent products/brands. In any case, you’ll have objective information that you can use to make purchasing decisions.

Things to keep in mind when negotiating

In negotiations, your relative position is important. You want to go through the quoting process when you are not in a rush to resupply. If you’re in a rush – you are pressed to simply buy from whoever responds first. If it’s apparent that you are in a rush, some suppliers can also give you less than optimal pricing. If there’s no rush, then you might even have some suppliers lower prices further after you tell them that you want to choose another company. Just make sure you don’t get a desperate supplier selling so cheap that they make no money, as they may simply end up giving you bad service.

You must let the supplier know that you are approaching the project professionally – that you know what you need, understand the products, and are looking at more than one company. Telling suppliers exactly what you want also helps them get it to you more easily. If the supplier feels like it will be easy to work with you, they are more likely to give you better pricing and conditions simply because they will expect fewer problems. Troublesome customers are expensive to deal with, and vendors love it when customers know what they are doing. You may say that it’s the vendor’s job and the customer is always right, but these things are simply “included in the price” for you. Once again, you must weigh the relative benefit of money saved vs. the effort spent on your part.