This article was written by Marc Castel, who has decades of experience in maintenance, the plastics industry, and digital transformation.
Parts will always need to be ordered and equipment will always need to be repaired. That’s just the reality. Without a good parts vendor, those orders and repairs can get expensive really quickly. That’s why getting the best deal on parts and pairing that with service you can trust is important to not only your bottom line, but ensuring production isn’t affected by breakdowns. The key to getting the best value for your money is through the art of negotiating.
In this article, we discuss eight tips to help you negotiate the best deal with your vendors – including knowing what to ask for, building a relationship with your vendor, and doing your homework.
What not to share, what to ask for
Don’t volunteer or initiate pricing with the supplier.
It might seem counterproductive to not discuss your budget with a vendor, but it’s actually a very powerful negotiation tactic. Keeping a vendor in the dark about your project budget or price expectations will defend you against your vendor asking for as much as you’re willing to pay. Generally, a vendor won’t volunteer a price that’s out of line with normality unless you give them a reason to. One of the best examples of this was when I mentioned my budget. I was acting in good faith and told my vendor I had a budget of $10k for the project. Miraculously, this is exactly the figure I was given at the end of the negotiation. I shot myself in the foot but learned a valuable lesson. No doubt, if I’d known then what I know now, I would have gotten a price at least 20% less.
Be flexible – you’re only interested in the bottom line but the sales person may not be.
Ask for their best price – to start.
Of course, an experienced vendor will never give you their best price immediately. Ask if they can do better than this as you have other competitive quotes for the same product. If they won’t budge on the price, ask what other services they can throw in as a bonus. Ask for things like covering the shipping cost or asking for additional things at no charge that doesn’t cost them that much or is high-margin items for them such as upgrades or an extended warranty. Extended warranties are especially nice options if they don’t have any room to move on price and they are confident about their product.
Don’t be afraid to follow-up.
If your vendor doesn’t come in with a competitive price, let them know. I used to follow up with the sales reps as soon as I had three quotes, and in fairness tell them that they didn’t come in at the best price. I would suggest they call me again if they had a special sale or could provide me with a better price in the near future. Strangely, I was often told, “As a matter of fact, we are having a special next week.” It was an easy way for them to come back with a sharper price without losing face.
Try to understand where the sales rep makes their money.
This helps structure the deal. Some reps work on a base salary and only get commission on accessories and warranties. By suggesting you pay full price on these, the rep may be able to provide a deeper discount on the base unit. If delivery is not critical, consider making the order near the end of the month, end of the quarter, or end of the year. Sales reps may need a quick sale to boost their overall sales numbers and will be more likely to cut a deal at these times.
Search for corporate intelligence that can provide important insight into your vendors motivation to make a deal.
Three things to consider when making the deal
- Check the website and the internet for company news. Search for corporate intelligence that can provide important insight into your vendors motivation to make a deal. Keep your eyes peeled for snippets along the lines of “last quarter’s sales were down” or “inventory levels were up.” Knowledge is power, and as far as knowledge goes, these pieces of information are as good as currency.
- If delivery is the big issue, you may want to accept a higher price, but with faster delivery. We sometimes paid twice the price for emergency parts, but I still asked for a discount. Delivery can often be sped up if you tell the vendor that this will be an important factor in selecting them for the next job or order. Sometimes the local sales rep will hand-deliver at no charge if you ask. You can also suggest that this might also be a good opportunity for them to get in front of you to show you other products or perhaps drop off some additional literature.
- Make sure you’re aware of the point of delivery, the free-on-board (FOB), and the delivery charges. Some foreign products may seem less expensive, but when you factor in customs clearance, brokerage, duty, etc., they often end up being the same price as buying local. This is often the case for small-value items. Always make sure to factor in the exchange rate for foreign currency transactions. Ultimately you need to be able to compare apples to apples.
- Remember your reputation matters, just as much as your vendors’. Vendors and sales reps are people just like you and me. If you are trying to negotiate a deal but the salesperson doesn’t seem to budge on prices or discounts, don’t take it out on them. Sometimes prices are fixed by upper management and there isn’t anything a rep can do. If this is the case simply move on in a respectable way. You never want to burn a bridge because you never know when you will need to cross it again.