One way to save money with hardware distributors is by separating purchasing bundles into individual components. This allows companies to negotiate individually with suppliers, leveraging a stronger position for better pricing. However, a company’s maximum leverage happens when assessing its needs, not when it’s ready to purchase.
Know Your Needs
Choosing the right suppliers significantly affects the cost and quality of your goods. Procurement specialists can help you find the best suppliers that meet your needs while offering competitive pricing. In the long run, this can save you money that can be reinvested in other business areas. When negotiating with hardware distributors, know what your key requirements are. This can include price, quality and reliability. Look at the full specification and decide what elements you can compromise on. Also, consider any ongoing costs such as repairs or consumables. Be sure to protect yourself against sudden price hikes that can arise when suppliers pass on the costs of a shortage in raw materials or other externalities. This can be done by hedging, shifting to a Just-in-Case model or partnering with a purchasing group. Another way to mitigate risk is through centralized demand forecasting, including operations and marketing input.
Be Flexible
Decide what you are – and aren’t – prepared to compromise on. For example, you may prefer a supplier that offers stockholding services or just-in-time delivery to reduce your inventory costs and the risk of obsolescence. You could also be open to sourcing processed goods rather than raw materials or pre-assembled products. Most hardware negotiations go wrong early when the customer still assessing its requirements. This is when the vendor has maximum leverage and knows whether it’s likely to win the business. Businesses can achieve better pricing by negotiating long-term contracts with a few preferred suppliers and viewing them as partners rather than adversaries. A flexible contract structure can help manage cash flow and avoid costly annual pricing increases at contract renewal. This frees up funds that can be used for investment or covering unexpected expenses. It also allows businesses to exploit opportunities like reducing supplier payment terms.
Know Your Requirements
Businesses that are aware of their requirements can find ways to reduce costs that don’t impact the quality of goods and services. This could include rethinking purchase bundles and consolidating suppliers to lower prices without sacrificing quality or service. A company’s maximum leverage in a hardware negotiation occurs when they are still assessing their needs and not ready to choose a vendor. By the time they do, that leverage is gone. Considering long-term cost implications is important as well. A deal that seems cheap today may become expensive when shipping costs increase or a natural disaster or business disruption causes a spike in demand. In addition, local sourcing can cut logistics costs, allow for faster response to change, and build stronger relationships that can weather disruptions. Optimizing cash flow by achieving full spending transparency and reducing payment processing times and lifecycles can also cut expenses for both parties.
Negotiate Early
It is important to be clear about about what you are and are not prepared to compromise. This will help you negotiate a better deal. For example, buying desktops for four years makes little sense when they will likely be replaced within three years. It is a false economy and will ultimately cost you more in the long run. Another way to reduce long-term costs is by negotiating with suppliers for volume pricing. This can be a win-win for both parties as suppliers get an opportunity to increase their revenue, and buyers receive savings on a per-unit basis. The most effective and cheapest way to mitigate the risk of price hikes is by employing several risk reduction strategies in procurement and supply chain management. These include hedging, purchasing futures contracts, shifting to a Just-in-Case model and partnering with a group purchasing organization. Doing so will put you in a much stronger position to resist annual pricing increases during contract renewal.
