Vendor Negotiations
Distributors Can Arm Themselves with Facts
You and your favorite supplier can often feel a bit like you’re on a teeter-totter when it comes to the vendor negotiation process. It works perfectly and can be enjoyable for both parties if you are both engaged and in agreement. Growth can be mutually achieved with a profitable outcome when evaluating key facts and continued communication. Back in the day, the fun of seesawing back and forth was the common outcome. But, in our world now, it’s improving your business, making your business run better, and seeing benefits in profitability.
Like the teeter-totter of our childhoods, it’s critical that both parties, you and your supplier, participate. What often stands in the way of that participation is the lack of an objective structure to facilitate conversations. Having data and the actual story that data is telling is the most impactful way to ensure conversations are moving both your business and your supplier’s business in the same direction.
Vendor Conversations
These conversations can come from a number of places and it’s important to be equipped with the right information for whenever the situation arises.
1. Checking In
Perhaps your supplier simply stops by or maybe it is a weekly or monthly call (hopefully not a yearly call!). Either way, the more prepared on the fly you are with your current concerns, the better.
2. Events
This can range from a joint sales call to the release of a new product to the acquisition of a new company. In all cases, of course, there will be quite a bit to discuss regarding your supply chain.
3. Employee Dissatisfaction
This is a common one that many distributors have likely experienced. You have employees that are unhappy and frustrated with something. Maybe they just discovered that the supplier down the street can buy these products for cheaper. Or perhaps a product didn’t ship or a quote was never received. When your employees are unhappy for these reasons, it likely means that there is a disconnect between your business and your supplier. You may need to take the opportunity to reset and ensure that all parties are moving in sync.
4. Not Comparing Favorably
Lastly, overall, you might be dissatisfied with the supplier, especially when compared to other suppliers you might be working with. When it is time to have a conversation about that, you need to lean into your data to pinpoint where they are falling short.
Stuck in the Middle
Distributors Negotiating with Suppliers and Customers
Distributorships can often feel like you are always stuck in the middle. You are a customer, but you are also a supplier. You are a salesperson but also a buyer. Suddenly, “the customer is always right” starts to get a little fuzzy because the supplier should always bring you value and expertise.
You may go from very contentious negotiation with your supplier across the table before hopping on a call in the next minute to trying to close a deal with a very significant customer. The ladder you think you are climbing can flip on you, forcing you into a different position with different goals. And it is up to you to make it all work out in the end. As a distributor, that is often just what it shakes down to in the constant up and down of vendor negotiations.
There is one thing you can grab onto, one cornerstone you can depend on, and that is data. It will allow you to take emotion and anecdotal evidence out of the equation and agree upon exactly what is going on.
Making Decisions Around Data
There is a perception that suppliers who have hundreds or thousands of multi-national distributors are always these highly sophisticated entities. We assume that they have this “know,” that they are making decisions around data, that they have a resource bank from which they can draw and do whatever they want. But that is not always true.
Even the largest companies may not be using data on how they should make decisions. Even if they are, they may not make it available to you. Why? Well, because they are in sales. They will show you what they want you to see and portray things in a way that is advantageous for them to accomplish their goals. That’s totally fine. All businesses do this. After all, there are a few scenarios where airing your dirty laundry and letting your customers know your problems is beneficial to your goals.
What’s important here is to remain cognizant of these practices and to look at data of your own.
Distributor Insights You Need to Know
5 Key Data Reports for Vendor Negotiations
There are five key areas to help root out problems with vendors and find areas of improvement:
- Purchasing and Sales Information: How much did you buy, and how much did you sell?
- Receipts and Fill Rates: How did they do with filling my orders and processing my POs?
- Inventory Turns and GMROI: Was my choice to stock this product a good one?
- Sales Order Fulfillment: Has my inventory matched my sales?
- Dead Stock: What items have been on my shelf from their vendor for longer than 12 months with no sales?
Collaborative Negotiations
Knowing where you stand in these distributor metrics allows you to evaluate the value of your supplier relationship during these vendor negotiations. Do not look at your distributorship with a “go forth and conquer” mentality. Instead, approach your relationships with a collaborative mindset.
Set a new standard in your meetings. Let your suppliers know that you have real data to talk about and significant and specific needs. Also, convey exactly where they stand in your company and how that directs your choices. It is remarkable how powerful those are in the negotiation process. Encourage suppliers to also come more prepared because they know you will have this kind of pointed conversation. It will also urge them to be more vigilant throughout your sales cycle to ensure that they look more favorable when they sit down with you and look at the numbers the next time.
To make the process easier, White Cup provides distributors with revenue intelligence tools for looking at business insights. Our White Cup BI – Business Intelligence software gives you a detailed view of each vendor relationship with insights into margin trends, fill rates, and other Distributor KPIs that help when it comes time to negotiate.
