Dealing with a Unique Supplier While You Don't Have Negotiation Power

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Dealing with a Unique Supplier While You Don't Have Negotiation Power
Jimmer Campos, Other, Colombia

Sometimes you have to close a negotiation process but you donīt have any negotiation power because your volume for purchasing is low, while your supplier is unique for the project or service you need.
How could you get the best conditions or minimize the risk?
How do you engage this unique supplier in the market to pay attention to your requirements?
How are you going to get advantage during the negotiation process or is there no negotiation at all?
What must you develop to reduce future risks? The unique supplier in the future could stop the deliveries and that could have a high impact in your supply chain...
Did you play this game? Please share your experiences and developments.

Negotiating with Powerful Suppliers
Koen Vandermarliere, Business Consultant, Belgium
I encounter this situation often with suppliers in ICT.
What I usually do is:
Your power in the negotiations will not be buying power but the power of information. I use Porter's 5 Forces Analysis to look at the vendor's position regarding competition, new entrants, substitution of his product, his suppliers and his customers.
I make our company as interesting as possible to him. As a reference in a tough market, as a door opener, joint developments...
Then there is the person you are negotiating with; what are his interests, what is his position in the company, did he make his sales figures...
On the risk side... Cover your bases using SLA, KPI, etc. But think out of the box, are there any other techniques, alternatives? Should you foresee buffer stocks, a stable supply for at least X months...? Do I have any impact on his supply ?
It is not an easy game, but one that is much more satisfying then the standard x% additional discount game.

Power of Marketing
Hamad Al Sadd Al Ali, Student (MBA), United Arab Emirates
I think it is the power of marketing. You see, the weaknesses of this unique supplier lies in that they just care about those who can process a lot of merchandise to customers and different segments.
But power of information is also important, and/but comes second after the ability to market.

Dutch Windmill
Koen Vandermarliere, Business Consultant, Belgium
An interesting reading on this kind of misfits between customer and supplier interests is about the Dutch Windmill (Van Weele, 2005, Purchasing and Supply Chain Management).
This is a combination of Kraljic and the BCG matrix.
I can't explain it in 1000 characters and Prof. Van Weele explains it so much better. So I recommend to read it. .

Selling Education in Developing Countries
zahra gheidar, Consultant, Iran
My experience is, about a controversial offer: "education". In developing countries basic needs always have priority over other demands. In such markets, selling an educational product is a huge challenge. During the two years we discovered the demand will not happen unless with our faith to our products.

Bargaining Power of the Supplier
Josephat Olwal Ngesah, Other, Kenya
I agree with you Jimmer that finding yourself in such a situation can be tricky.However, I like @Koen's approach with Porter's Five Forces and the idea of SLAs.
First, have confidence in yourself and this can be drawn from your conclusions on the 5 Forces analysis. Keep your eye on the ball, that is a WIN-WIN outcome. Let the Supplier know that more than one supplier in the world is able to sell oxygen which is life-saving. It may also be useful to convince the supplier diplomatically that though you're small, you have the potential to grow and that it maybe more rewarding to engage with "small customers" in the long term than engage with "big customers" in the short term. Large customers may also unleash buyer power that reduces their margins. A long-term relationship with so called low-volume customers may result in the latter growing volumes and becoming more reliable and loyal than the big boys.


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Koen Vandermarliere
Business Consultant

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