I wrote about ideas for avoiding a supplier price increases in last two posts: 9 Ways to Fight a Supplier Price Increase and Supplier price increases — get creative. Avoiding price increases isn’t purely a matter of “just say no”, which doesn’t usually work unless you’re a big gorilla customer with a lot of market clout or are only game in town, so to speak. The rest of us will need to put aside the baseball bat and try other approaches. Realizing that not all suggested approaches are available to every organization or are applicable to every supplier, I’ll suggest a few more approaches that could be effective in staving off a price increase.
Not sure if acronym WIIFM (What’s in it for me) is used much any more, but it’s a powerful way of thinking about your suppliers by putting yourself in your supplier’s shoes. It can give you a better shot at working out a compromise. One WIIFM approach is to see if increasing the quantity you procure from a supplier would allow them to avoid increasing their price to you. If the supplier gets more of your business, then they may be more amenable to holding the line on pricing.
Another WIIFM approach is improving payment terms to the supplier. One of the most coveted customer behaviors is favorable supplier payment terms. It engenders loyalty and solidifies relationships. And, in some cases, improved payment terms will allow the supplier to avoid or delay passing along a price increase.
All the creativity and kumbaya in the world sometimes just won’t cut it. A price increase is sometimes unavoidable due to many circumstances and market conditions. So what else is left to do? You can try to get the supplier to delay the timing of the price increase and extend the life the current pricing. Or, many companies seriously consider and analyze make v.s buy: would it be worth bringing the manufacture of a product or the delivery of a service in-house? Organizations may consider doing the detailed analysis to decide on the costs and benefits of having their own staff and facilities perform supplier work. Make vs. buy decisions should not be taken lightly. Both strategic and operational variables need to be carefully considered.
The bottom line is that supplier price increases require a considered response. With key, strategic and critical suppliers, it is important to maintain a strong relationship and to work through price increase requests thoughtfully and often creatively.