Black Belt Negotiators: How to save on banking services
By Purchasing Staff -- Purchasing, 2/12/2009 2:00:00 AM
Purchasing's smartest negotiators move from conflict to collaboration fast. Match your wits against these pros. Guess their strategy. Then, read what they really did atpurchasing.com/negotiations.
Possible alternatives: Accept the higher prices from the major supplier; try to force price reductions with the major supplier; work with the other suppliers and try to help them improve their service. Seewww.purchasing.com/negotiations for the solution.
A major european bank was sourcing specific financial services. There were only three major suppliers of the financial service. One of them had a major share of the market. It had more experience than the other two competitors, but its prices were higher. The bank wanted to lower its price for the service, but internal bank customers did not want to shift to a lower-cost supplier.
Background: The largest supplier had a good quality and delivery record. The other, lower-cost suppliers previously had problems with quality, which reinforced the attitude among internal bank customers that they didn't want to use them and take a chance on receiving poor service, even if they could have saved money. Solution: www.purchasing.com/negotiations.
Possible alternatives: Accept the higher prices from the major supplier; try to force price reductions with the major supplier; work with the other suppliers and try to help them improve their service; accept the poorer service from the lower-cost suppliers to save money.
The Solution: Purchasing arranged a test in which they created a quantifiable supplier-quality performance-appraisal form. The test showed that quality was nearly the same for all three suppliers. That convinced internal customers to agree to allow purchasing to negotiate with all three suppliers. Purchasing agreed to give the two lower-cost suppliers a certain percentage of the business if they dropped the price to a certain point. Purchasing said if either supplier’s quality slipped by a certain percentage, they would re-distribute that supplier’s share of the business to the other suppliers. The major supplier dropped its price by only one percentage point, so it got no volume guarantee. Purchasing told that supplier if it’s quality slipped it would pay a three-percent penalty. The result was that the average cost per delivery dropped 1.5 points. Quality only dropped slightly. The major supplier agreed to negotiate a lower price. The bank earned a nearly one-million Euro cost advantage as a result of the arrangement.
Are you a black belt negotiator? Tell us about one of your negotiation successes, and we'll print it so others can learn from your experience. Send it to pteague@reedbusiness.com.
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