A firm’s primary goal for its upcoming raw material negotiations with a well-performing supplier is cost reduction. In order to achieve this, which of the following courses of action should supply management take?
A.
Offer to purchase a larger volume of material over the next five years
B.
Inform the supplier where it is located on the Kraljic Matrix and request price concessions
C.
Review the supplier's key performance indicators (KPIs)
D.
Research market conditions and the supplier's tolerance for early payment incentives
Research Market Conditions: Understanding current market conditions helps in assessing whether the supplier's prices are competitive and reasonable.
Supplier’s Financial Situation: Knowing the supplier’s financial health and their tolerance for early payment incentives can be crucial in negotiations.
Negotiate Incentives: Offering early payment incentives can be an effective strategy to negotiate cost reductions. This benefits the supplier by improving their cash flow.
Evaluate Alternatives: Consideration of alternative suppliers or negotiating other terms can also put pressure on the supplier to offer better pricing.
References:
CIPS: "Negotiation Techniques in Procurement and Supply"
ISM: "Supplier Negotiation Strategies"
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