Recent Posts
- Business Travel Rule: Beware of becoming the Tour Guide
- The Olympics' impact on suppply chain: Were you prepared?
- Cost analysis: Everyone is an expert
- Reorganizations: When do they stop?
- Duel Sourcing? Awe the cost!
- Quality vs. Supply Chain: A Love/Hate/Love Relationship
- Supply Chain Skill Sets: What Matters Most?
- Supplier Relationships and Personalities
- Target pricing: Will your target hit the Target?
- What did you say? Communications are #1.
Recent Comments
- Lawrence Wang on Target pricing: Will your target hit the Target?
- purchasing agent on Supply Chain Skill Sets: What Matters Most?
- Arshad Khan on Duel Sourcing? Awe the cost!
- Michael Higgs on Supply Chain Skill Sets: What Matters Most?
- anonym on Supply Chain Skill Sets: What Matters Most?
Most Commented On
- Supply Chain Skill Sets: What Matters Most? (3)
- Target pricing: Will your target hit the Target? (2)
- What did you say? Communications are #1. (2)
- Duel Sourcing? Awe the cost! (1)
Archives
Blog
Target pricing: Will your target hit the Target?
March 28, 2008
Recently I have found myself falling in the trap of giving target pricing up front, and not surprisingly, my supplier loves it. That may not be true, but I feel that way. I was in a meeting recently negotiatiog the cost of a product, when the supplier said, “just give me your target price” and well I did. About two seconds later he said “ Ok, well hit it” and we where done.
Now in any negotiation class they say the best negotiation is the one where both win, but I always ask myself, “how much did I just leave on the table?” I always picture the supplier walking away smiling and giving each other high fives, and I am scratching my head. My buddy always says “if you feel like you got a good deal, then you did. Don’t worry how much they make as long as you’re happy with it.” You know I have to agree.
This brings my to my point, I have three targets I set when negotiating:
- What cost do I need?
- What cost do I want? (and the one I give my supplier)
- What cost am I willing to settle for?
Clearly, you need to keep in mind market conditions and your own strategy and attitude for the deal (as that will sometimes make you tougher than you normally wood be). With any target price or move of a product you should always know what it costs you today, what it will take to move it and never forget the logistics costs. I have seen more great deals go down in flames, because the shipping and transition costs were not included. There may be other things your industry needs to consider, but those two are the big ones to me.
Just keep in mind that target costs are like tools—if you have one you either over-use it or never use it, but when you need it you rarely have it. So like any good Boy Scout always be prepared!
Posted by Michael Higgs on March 28, 2008 | Comments (2)
In response to: Target pricing: Will your target hit the Target?
Jim Smith commented:
As a salesperson I'd say targets are sometimes helpful. They help answer the question "should we even try for a piece of business?": Many times a competitor is working off costs that are based on much larger volume buying than we are. What is great business for them could be unprofitable for us. I don't think it is dangerous to be frank and say exactly what you need, unless of course you haven't done your homework.
In response to: Target pricing: Will your target hit the Target?
Lawrence Wang commented:
I would like to provide that to the suppliers just when this stuff is very urgent for me. Normally I await them until quote me which need some times but you have much negotiation space and you are easier to keep them having good improvement intent, because you can increase some price if they get better quality in the future. that is just my experience over the past ten years.