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Negotiating strategy while vendor raises prices

Anonymous A

What are some of the ways you can negotiate when the vendor decides to raise the prices of the supplies . Lets assume that the reason of their price rise is that we did not confirm to some of our terms and conditions. (we delayed picking up the items which led to higher inventory holding costs at their end )

An (Jack)
Expert
replied on 05/31/2018
Google Strategy Manager | Ex- BCG Consultant | References Available

Hello

Would be great to get a bit more context on what are our core interests and the vendor's core interests (most important), as well as info on bargaining power between the parties and what is the nature of the loss that the vendor incurred (is it one off or substained?)

A few high level tactics come to mind in any event

1. Improve your own negotiating position by finding alternative suppliers - you can find an alternate dedicated supplier, or split the volume between several suppliers and have them compete against each other to produce better terms

2. Restructure the terms to align closer to each party's interests: include a term that pays the vendor for additional inventory holding costs in times of delay, but exclude the vendor from being able to lift up prices in general.

3. Restructure services and your own operations: remove your own pick up operations and use the savings to have the supplier deliver to your own premises instead.

Hope that is helpful!

(edited)

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