Black Belt Negotiators

True stories of business collaboration

By Purchasing Staff -- Purchasing, 8/10/2008

Are you an expert negotiator? Then share your experience with other purchasing pros. Send us your examples of successful negotiations, and we’ll include them in our file of Black Belt Negotiator case histories.

Purchasing’s Black Belt Negotiators column relates real examples of actual negotiations readers have been involved in, describing the issues at stake and how the procurement staff resolved the negotiations.

Read these examples and see if you can come up with a better strategy for the negotiations.

And send us your own examples. We’ll run them in our column so you’ll be known as a Black Belt Negotiator too. Send them to pteague@reedbusiness.com

New twist on low-cost-country sourcing
Testing-equipment manufacturer Instron was looking for ways to lower costs. As a global company, it has operations in the Americas, Europe and Asia. With the U. S. dollar weak, the company assumed that it would save money as it sourced materials and components for its overseas subsidiaries from U. S. suppliers. It seemed like a new and interesting twist on the concept of “low-cost-country sourcing.”

Problem
Monitoring the program, Director of Global Procurement Tom Murphy learned that some of the U. S. suppliers were selling their products to Instron subsidiaries after currency conversion at twice the cost in U. S. dollars. The result was that Instron’s subs were paying far more than they should have been paying. Murphy met with the suppliers in question to negotiate a solution. The suppliers said that doing business in countries such as Germany and the United Kingdom was higher than doing business in the U. S. 

Solution
Murphy told the suppliers he didn’t believe their rationale and asked them to cut their prices. “If you don’t ask, you don’t get,” he says. He agreed to establish a “country” cost for each country using the U. S. cost as a baseline. Even with the country cost, which included a 10-15% increase, he saved money. Additionally, he bought some product from U. S. distributors and shipped them to the subsidiaries rather than have them buy locally.                                                                                                                                          

Archive:
How to improve supplier performance - July 2008

Spring price gives bounce to cost-cutting effort - June 2008

How to handle single sourcing  -May 8, 2008

'Deliver those connectors on time—or else' -April 8, 2008

'Cut those packaging costs' -Mar 13, 2008

'The Battle of the Forms'  -Feb 14, 2008

"Bowled over by sourcing constraints" - Jan 17, 2008

'If your MRO prices are the best, prove it' - Dec 13, 2007

No tiptoeing around those resin price hikes - Nov 15, 2007

FPGA costs: ‘Your margin is too high’ - Oct 18, 2007

The cable guys' dilemma  - Sept 13, 2007

'Sorry, no price break possible' -Aug 16, 2007

“Tell us your real costs”-July 14, 2007