Executive Briefings

Reintroducing Competitive Pricing to Your Existing Supplier Base

When multiple vendors compete for your business, you can expect to see aggressive pricing. But with your existing suppliers, competitive sourcing is not always an option, and without that you may be paying an above-market premium.

True competition would require that you be willing and able to switch vendors. But your current supplier may be working closely with your team. Or there may be few alternatives to the current partner, and you may be in the middle of a long-term agreement with heavy penalties for ending the relationship early. Not to mention the fact that formal sourcing methods such as RFPs can disrupt strategic relationships, and will eat up significant time and resources across the organization.

Your suppliers know that it is hard to switch, and they will leverage their incumbent position to charge a higher price than you would pay if selecting a new solution today. When your vendor's pricing is above current market rates, developing the correct negotiation strategy requires that you quantify the nature of the premium you're paying, and ask yourself why your supplier believes it doesn't need to make price or service concessions.

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Keywords: supply chain management, supplier base, supplier selection, supplier pricing strategies, paring suppliers, renegotiating supplier contracts

True competition would require that you be willing and able to switch vendors. But your current supplier may be working closely with your team. Or there may be few alternatives to the current partner, and you may be in the middle of a long-term agreement with heavy penalties for ending the relationship early. Not to mention the fact that formal sourcing methods such as RFPs can disrupt strategic relationships, and will eat up significant time and resources across the organization.

Your suppliers know that it is hard to switch, and they will leverage their incumbent position to charge a higher price than you would pay if selecting a new solution today. When your vendor's pricing is above current market rates, developing the correct negotiation strategy requires that you quantify the nature of the premium you're paying, and ask yourself why your supplier believes it doesn't need to make price or service concessions.

Read Full Article


Keywords: supply chain management, supplier base, supplier selection, supplier pricing strategies, paring suppliers, renegotiating supplier contracts