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.

In an effort to improve a supplier's performance, Ray Shepard, sourcing and commodity manager at Parker-Hannifin's Chelsea Division, met with a company that supplied wire harnesses. Among issues he discussed were Internet MRP connect, quality problems, on-time delivery, and vendor-buyer material-planning coordination, as well as Parker Hannifin's strong stance against price increases. He presented the supplier with a letter containing the steps the supplier needed to take before submitting a price increase notice.

Despite the letter, the supplier said prices were about to increase because the cost of a spring, a major component of the harnesses, went up from 8¢ to 34.7¢ each. Based on 260,000 pieces purchased, that represented a cost increase of more than $69,290, annualized, which the supplier wanted to pass on to Parker-Hannifin. Shepard had to find a way to get the supplier to not pass on the cost.

Possible solutions: Accept the price increase, change supplier, redesign end product. What would you do? See www.purchasing.com for solution, and comment on what you would have done.

Solution: Shepard said to the supplier, “if I can reduce the price for the spring back to what you were originally paying or lower through vendor sourcing, will you agree not to raise the price? The supplier said yes.

Then, he created a request for quote (RFQ) and e-mailed it out along with a print to twenty-three spring suppliers. The next day, he received four quotations that ranged in price from $.0047 to $.035 each. In effect, he showed he could reduce the supplier’s cost by over $88,800 annually. If compared to the original price of $.08 each, there was a $19,600 savings. By successfully vendor sourcing for the supplier, he took away the supplier’s excuse for the price increase.

Additionally, he asked if the supplier had any suggestions on how to further reduce the cost for any of the other parts. The supplier said a significant saving could be achieved by changing from the thick plastic tie to a thin bread wire tie. Not only would the material cost be lower but the labor using a tool to twist the thick wire tie around the product would be eliminated. Shepard presented the idea to his engineering department and the department approved it. The supplier has subsequently reduced prices for all materials supplied. 

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.