Tag Archives: Purchasing Agent

How Do You Work with Purchasing Agents? Three Approaches

Situation: A company has a long standing relationship providing an exclusive product to a major customer and has a negotiated price and volume contract for this product. The customer changes product design every few years, and the company is the favored supplier of certain components. The customer’s purchasing agent has asked to renegotiate price on the current contract. The company wants to maintain a good supplier relationship with the company, but doesn’t want to lower the price on its product. How should the CEO work with the purchasing agent?

Advice from the CEOs:

  • There are two distinct opinions from the group:
    • You have a contract in place for volume and price. If you yield on price now just to assure the remaining business on the current contract you are saying, in essence, that future pricing contracts are also negotiable even after the contract is negotiated and signed.
    • On the other hand, if you know that there is a model design change in process and want to assure a good ongoing relationship with the company you may choose to yield a bit on price for the remainder of the current contract.
    • The choice between these two will be a gut choice based on your relationship with the customer as well as your past history with the purchasing agent.
  • You might want to try a creative alternative. Check with your own component vendor and inquire about pricing if you place orders for your own remaining components on the current product today versus in several weeks. If there is a discount for placing the order today, call the purchasing agent and tell him that if he orders the remaining product on the current contract today, you will pass on the discount that you receive from your vendor. If you don’t get the order today, then you will lose the discount, and there may be a delay on your being able to deliver the remaining parts under the current contract.

Key Words: Component, Supplier, Vendor, Purchasing Agent, Contract, Relationship, Discount, Delivery, Negotiate

How Do You Respond to Pressure to Cut Prices? Six Guidelines

Situation: One client represents a majority of a company’s revenue. They have multiple contracts with this client. A new purchasing agent is on a mission to reduce purchasing costs, and claims that other suppliers cost less. What’s the best response?

Advice from the CEOs:

  • Spend time with your true client – the employees and managers who have chosen your product. These people stand to gain the most from an ongoing relationship with you and may be able to reduce the pressure from purchasing.
  • Assemble testimonials and metrics from the client to show that you produce a better result at lower cost than they can get from other suppliers.
  • Simultaneously, reduce your overhead so that if you must cut prices to retain the business, you can afford it.
  • If you must cut prices, you have other options:
    • Reduce the cost of resources producing the product and service. Let your client contacts know that you are being forced to do this. This may prompt them to argue that they need more senior experience from your team at the higher rate.
    • Offer lower prices in exchange for higher volume and longer term purchasing commitments. This can lock out the competition by reducing the frequency of contract renewals.
  • Remember that the job of the purchasing agent is to reduce costs. The agent who is hounding you is hounding other suppliers as well. If they can negotiate savings from 30% of the suppliers, it’s a big win. Get your ducks in line so that you aren’t in that 30%.

Key Words: Purchasing, Contract, Purchasing Agent, Cost, Client, Customer, Metrics, Cutting Prices, Purchase Commitment