'The robot costs too much!'
Among many possible solutions: force a lower margin or change the system design. What would you do?
By Staff -- Purchasing, 5/3/2007 6:00:00 AM
Engineers at a U. S. manufacturing company wanted to use a Japanese-made robot as one of the motion control elements of a large and complex electromechanical system. The robot had proven totally reliable in other applications. The robot manufacturer had a stellar reputation, the capacity to guarantee the required supply and could meet all delivery schedules.
Problem: The robot was the most expensive element in the system and would have potentially made the system too costly for the market. Tom Murphy, who has since moved to Instron, led purchasing's negotiations with the supplier. He wanted a lower cost. The supplier wanted to maintain its margin and retain the business. All options were on the table, including changing the design—and the supplier. Murphy and the supplier's CEO devised a strategy that enabled both parties to achieve their goals.
Solution: Tom Murphy, the purchasing manager of the motion control systems manufacturer, and the CEO of the robot manufacturer decided to collaborate on a solution rather than argue about one so the supplier could sell Murphy’s company more robots and the company could sell more systems. They worked together to get the price down. Here is what they decided to do: 1. Murphy agreed to extend the current contract with the robot manufacturer from one year to two years.
2. He also told the robot manufacturer that his company didn’t need support for the system. The robot supplier agreed to eliminate service from the cost.
3. After a full engineering review, Murphy and the supplier agreed that he didn’t need all the parts in the supplier’s usual robot system. They identified the unnecessary parts, eliminated them from the system, and reduced costs further.
Total savings: 8-10%
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 at purchasing.com/negotiations .
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 topteague@reedbusiness.com.
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