Negotiate a better deal through your supply chain

Good negotiations with your suppliers can improve your supply chain management and business cash flow. But negotiation doesn?t necessarily mean haggling on price, writes Matthew Nolan.
Supply chain management refers to the methods and procedures businesses apply to manage the flow of goods through their company, from sourcing raw materials right through to sale of products to the end consumer. The more efficient your supply chain procedures, the smother and faster goods can pass through the business to your customers ? which means greater control over your cash flow and greater profits.
As we discussed last month, the relationships with the various suppliers in your chain are important, as are communication channels, in maximising efficiency. But you can also further increase your profitability through improved negotiations with your suppliers.
Negotiation is the process two or more parties undertake to come to mutually beneficial agreement on the outcome of a particular situation. When negotiation is considered in a business sense, most people immediately think about wrangling over price. While important, it is often not the only goal to aim for.
When negotiating with a prospective supplier, there are a number of fundamentals worth keeping in mind to help manage the process and best position your business to achieve its desired results.
The first step is to identify your purchasing objectives, and where you are prepared to be flexible. Just keep in mind that it?s important that you are perceived to be approaching a deal positively, but be careful to do so without revealing your entire position or objectives.
A Heads of Agreement can be used throughout the negotiating process to help document key points of a deal. This can be especially handy should you be placing a large order with a range of variables. For fashion retailers a Heads of Agreement might outline the specific clothing line you?re purchasing, quantity, size specifications, delivery times and options to source additional stock.
When planning your negotiation strategy you should consider your cash flow requirements and sculpt a deal to better serve your cash flow needs. For example, you can try to secure longer payment terms on purchased items, for example 60 or even 90 days. You can even explore available options to receive upfront discounts for early payment, made possible by funding the purchase of stock or inventory, without tying up your available cash flow to use for other business building purposes.
Once you?ve established the basic terms of a deal, and those points of importance, you can begin to enter more detailed negotiations. Value for money, delivery, payment terms, after sales service and maintenance should all be considered before negotiating on the suggested price. You?ll also need to run checks on your suppliers, carry out due diligence, draw up contracts and determine what after-sales service is required.
Negotiation tactics will vary depending on your relationship with a supplier. If you?ve been working with a supplier for a number of years, there will be value in the establishment of the relationship. Remember, don?t under estimate your value as a customer; it takes time and money for suppliers to find new clients.