Many companies today find that dealing with suppliers has become quite challenging. Many suppliers dominate marketplaces, naming their prices and forcing in markets bereft of options.
Many businesses may feel helpless when negotiating with these intimidating suppliers. However, clever dealmakers who can spot opportunities within their market can prompt these suppliers to play fair.
Four strategies for working with suppliers
Savvy businesspeople with a thorough understanding of their industry may find success employing the following tactics when negotiating with powerful partners:
- Increase the company’s value to the supplier: Suppliers appreciate avenues for profit. If a client can provide information about a new potential market or untapped region, they will likely jump at the opportunity. Suppliers also appreciate opportunities to reduce risk with longer-term contracts and orders other clients are unwilling to make.
- Change buying habits: Responsibly adjusting buying habits to counter supplier tactics requires exhaustive research and analysis. If various business units are separately purchasing from the supplier, consider consolidating the orders together can provide a clear understanding of spending. Forming purchasing consortiums with other companies can consolidate purchasing power and leverage for better prices. Companies can also decrease their business, pulling orders they could get cheaper elsewhere, or adjusting the company’s scope to rely less on the supplier.
- Create a new supply source: Creating an internal supply chain can eliminate reliance on a monopolizing supplier. This bold venture is not without risks, but a well-executed plan can change the entire marketplace. The easiest method by introducing a new supplier from an adjacent market. Another is to vertically integrate the production of the supplies into the business itself. Sometimes, if suppliers see their clients taking this route seriously, vetting real estate and quoting equipment purchases, they may reconsider their terms.
- Get firm: As a final resort, companies may turn toward more drastic measures to assert their rights as a client. Canceling orders, phasing out the supplier from future projects and even threatening a lawsuit all send a firm message. Some suppliers may ignore these strongarm tactics, but few large companies appreciate the close eyes of government agencies regulating monopolies.
Seek legal counsel
Hiring a local attorney familiar with business litigation and government regulation can help a company find creative ways to negotiate with dominant suppliers. A lawyer can also help draft comprehensive business contracts, settle disputes and navigate dense financial documents in search of opportunities.