Two Questions for Better Pricing and Lead Times
Each purchaser has their own set of tasks, duties, and deliverables that are unique to their company. If that’s the case, what two universally-applied golden questions should you ask parts vendors? What two questions could unlock better pricing, reduced lead times, and stronger relationships?
A clue – It’s not about certifications or capabilities. You’ve surely covered that. It’s about the vendors' efficiencies:
Question #1
How can we better match and support your buying, set-up, and cost efficiencies when we order from you to get a better price, lead time, etc.?
This question may seem to turn the customer relationship on its head, where now you are asking what you can do for the vendor. While it is true that you are offering to align yourself and support them with your actions, you are finally getting closer to what you want in the relationship by defining the variables that go into the vendor’s quoting and operations. Every customer wants reduced costs and lead times, as well as greater quality and predictability from their vendors. Not many customers are willing to learn how to speak the vendor's language and help the vendor be as efficient as possible through understanding and ordering in efficient ways that support the vendor's efficiencies and economies.
“The way it’s always been done” and the order quantity that “so-and-so always ordered” before you came along isn’t necessarily doing you or the vendor any favors. When I was purchasing, I found this question unlocked some unsettling truths. The company I worked for had “always” ordered 10,000 pieces per PO from a metals vendor. In response to the question, the vendor explained that the way they ordered raw material and ran it meant that they always had to over-run parts on our orders due to only getting 8000 parts out of each run before changing over the raw material handling and feeds. Thus, our 10,000-piece purchase order meant they would have two set-ups and have to sit on some of our stock until our next order. By ordering 8,000 at a go, we could avoid a whole set-up and get a slightly better rate per part since the vendor didn’t have to go through the warehousing and extra tasks of holding parts for us. In other cases, we found that increasing our order quantities could allow our vendors better efficiencies that both we and the vendor could enjoy in cost savings and reduced lead times.
Question #2
Are any of our demands, specifications, and requirements a pain point for you?
Without some reassurance, this question may make the vendor feel unsafe and hesitant to show an apparent weakness. They will likely open up if you can assure them you are simply looking to understand and that you are trying to remove any unnecessary obstacles for them in return for better costs, predictability, quality, etc.
Some answers may not surprise you and may still be nonnegotiable, such as a tight part tolerance you must uphold. You may be surprised, however, to find there may be assumptions in the relationship and requirements or even some tolerances that are negotiable. An example could be the part packaging and shipping requirements. Without discussing expectations and requirements for shipping parts, a vendor may default to their standard or assume “what has always been done.” You and the vendor may assume that since your previous vendor always shipped the parts by parcel, the new vendor must match the parcel and packaging expectations. Perhaps after talking with the vendor and asking this question, you both agree that the vendor can utilize LTL or parcel depending on the item and costs. Or perhaps there are tolerances on a “non-working face” of the part that could be loosened to save time and money, such as chrome surface specs in areas where needed versus the entire part or rough milled surface in areas that do not require finishing. Exploring this together could help both of you save time and money and increase the value of the relationship.
The vendor and customer relationship doesn’t have to be difficult or mysterious. As a contract manufacturer, Big Rock Manufacturing makes parts to your specs. It’s critical to define expectations early on in a relationship and then in regular reviews, as Big Rock and customer operations can change over time. The vendor and purchaser both improve their positions by working together to define and seek alignment of efficiencies up and downstream.
