Renegotiating: 6 Reasons To Do It

Are You Underestimating Your Renegotiating Power?

PurchTips Edition #336 Click here for the printer-friendly version

Don’t miss updates on Procurement & Supply Chain, Subscribe here!

When negotiating in the context of a strategic sourcing process, your reason to ask a supplier for a lower price can be simple: because if that supplier doesn’t comply, you’ll buy from someone else. But reasons for renegotiating a price with an incumbent supplier outside of strategic sourcing may not be as obvious. However, there may be plenty of reasons to renegotiate that old price, such as:

  • The supplier is charging different prices to different departments within your organization.
  • The price index – such as the Producers Price Index – that applies to the product, material or service that you are buying has declined in value since your price was established with the supplier.
  • While doing business with you, the supplier has progressed down a learning curve, enabling it to produce your products or services more efficiently and less costly compared to when it started.
  • Your volume of purchases is higher than what was estimated when the initial pricing was established with your supplier.
  • You have become aware that published prices in the marketplace have become lower than those that the supplier is offering to your organization.
  • Your organization needs to receive a lower price on direct materials and services so that it can keep its own prices to customers competitive, thus enabling the winning of more business and continuation of demand for those materials and services from the supplier.


final

Want to get more procurement articles by email for free?

Members of the NLPA get great articles just like this by email every two weeks. As a member, you will also get access to:

And the best part is that membership in the NLPA is Free! Sign up today and you'll receive a username and password that will allow you to access all of the benefits that come with the NLPA membership.

Copyright 2015. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3

This is the Web-based version of this article. Click here for the printer-friendly version.