Black Belt Negotiators: How to forge a contract for forgings
By Purchasing Staff -- Purchasing, 11/13/2008 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 solutions: Find a new supplier who would agree to work under the blanket order; work with several suppliers; buy all the inventory at once. See www.purchasing.com for the solution.
A major instrumentation company had steady demand patterns for forgings. But demand fluctuated occasionally—often requiring the company to buy more forgings than it had originally forecasted. The company wanted its forgings supplier to guarantee timely supply so it could satisfy sudden, unexpected demand.
Problem: The instrumentation company wanted the forging supplier to accept a blanket order and ship the forgings monthly. If, because of higher-than-expected demand, the company used up the blanket-order quantity, it said the forging supplier could re-price and build more forgings at normal leadtime. The company also promised that if it didn't take the full blanket-order quantity by the end of the year, it would take whatever was left after 15 months. The forging supplier was reluctant to agree because it had been previously stuck by other customers with unused inventory. See purchasing.com/negotiations for the solution.
The solution: Purchasing met face to face with the supplier and gave his personal guarantee that they would not stick the supplier with unused forgings. All the guarantees were in writing. Purchasing also explained that the contract was a win-win. The instrumentation company would be able to satisfy unexpected demand, and the supplier would be able to set up and forge once per year, assured that its inventory would be covered. Additionally, the company said it would cover the forging supplier’s costs if there were engineering or obsolescence issues caused by the instrumentation company. Finally, the company suggested quarterly meetings with the supplier to review demand and inventory issues.
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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