I hope that you have enjoyed the article “Negotiating The Ultimate Contract.” Writing this article reminded me of a “war story” from my early purchasing days – not necessarily on negotiating the Ultimate Contract, but more in terms of making sure that the supplier is most competitive on all variables.
The company I worked for was buying signage like crazy. And our internal customer’s approach to determining demand was soooo non-strategic (if I knew then what I know now, things would have been different).
Anyway, there were some specialty-type sign items that we were buying. Not every sign manufacturer had the capability to produce the type of precision-cut lettering we were looking for. When our internal customer determined the sign needs for one location, he wanted them ordered NOW! That meant no waiting to determine what else we could package into a deal to have more leverage and get a better price.
And this was a high-profile project with Chairman of the Board involvement so, as a new buyer, I wasn’t going to push back.
So we’d go out to bid, select a supplier, and a couple weeks later go out to bid again. We found ourselves primarily using two suppliers who met our quality requirements, were competitively priced, etc.
In this one solicitation for signage, one of the suppliers (Supplier A) offered a slightly better price, but the lead time was two weeks longer than the other supplier (Supplier B). So, we decided to pay a small premium to get the better lead time. Knowing the jobs we had in Supplier A’s shop didn’t give us any reason to question their lead time.
In the debriefing, we told Supplier A that they didn’t win the award because their lead time was 8 weeks instead of 6 weeks (what Supplier B proposed). The supplier ranted and raved that they could have done the job in 6 weeks.
In my mind, I said: “Well, uh, if you could have done it in six weeks, why didn’t you say that! Doesn’t it make sense to put your best foot forward? Duh!”
But the supplier wasn’t the only dumb one. I was too.
With a quick phone call to each supplier to see how flexible their important variables were, I could have saved my company a few dollars – much more than they would have spent paying me for the few minutes I spent “negotiating.”
So, the moral of the story – and how it ties in to the article – is that a buyer should never assume that any variable is inflexible. Ask for improvement on them all. That’s one of the keys to negotiating the Ultimate Contract.