Several years ago, I actually looked at one of our homeowner’s insurance bills and found our provider increased our rates significantly beyond our initial rate. So, I went out and found better coverage and a much better rate with an alternate provider.
Then, the other day, my new homeowner’s insurance bill arrived in the mail. “Ugh”, I thought, another envelope I’ll let my wife take care of. Then, I heard her ask me if I was interested in taking a look at it.
With a lack of enthusiasm and sincerity, I said, “sure, why not”. To my shock and horror, the bottom line struck me like a kick to the gut…a whopping 40% increase! For once, I was actually glad to get a paper cut!
In less than an hour, I had a new homeowner’s policy through another provider that was 20% less than my previous year’s rate. Celebrating my victory I added the savings to our vacation money jar!
So the question I have for you is simply, “when is the last time you looked at what your suppliers are charging you for goods and services that are typically overlooked”? If you had difficulty answering this question, you are making a common procurement mistake.
Think about it, even if you are utilizing many of the procurement best practices and are taking the time strategically negotiating large deals, there are goods and services purchased that are potentially falling under the radar.
Andrew, your long-forgotten supplier, certainly isn’t going to call and say, “Jacob, you are spending 15% more for paper supplies than you have to, let me offer you better pricing”! Andrew is glad to never hear from you and may even try to slip in additional price increases without your knowledge. Jacob, it is time to go to battle with Andrew!
Now, it doesn’t have to be a battle of cinematic proportions, rather, it can be a “win-win” for both organizations!
Remember, the last number a supplier wants to see showing up on his or her phone is from a buyer who buys in large quantities, pays their bills on time and never asks any questions.
Before contacting your supplier, make sure you are well-prepared with a list of open-ended questions to ask your supplier regarding terms, pricing and possible solutions that are satisfactory to both parties.
For example, asking a question like, “can you do better on the price of paper supplies?”, can easily be dismissed with a simple “no”.
Whereas, saying, “Andrew, we have had a great relationship with FineView Industries for years, but I recently noticed that the price of paper products is much, much higher than your competitors, what can you do to help us both out?”
In this scenario, you are asking an open-ended question that requires a thoughtful answer. You are subtly implying that even though you like FineView Industries, you are very much aware of their competitors without making a direct threat to take your business elsewhere. Also, by positioning the question with the wording “help us both out”, you are letting the supplier know you are willing to achieve a “win-win” result.
Of course, you will want to utilize your contract-writing skills as well, making sure you have the newly agreed upon terms in writing. Just make sure your supplier isn’t hiding any pricing or terms behind fancy jargon. That would be another procurement mistake.
Once you have hashed out the details and negotiated agreeable terms, make sure to let your supplier know you will keep in touch. This is a good way to keep your supplier relationship strong and helps to keep you as a top of mind buyer for your supplier.