W. Edwards Deming once said, “End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust."
These are some of the wisest words I have heard regarding suppliers in a manufacturing environment.
We all know consumers want to save money. So, a common practice is to cut costs by pushing suppliers to reduce pricing of their components, materials, and services. This model has been around for a while as the standard manufacturing procurement model.
There is nothing wrong with renegotiating costs with your suppliers. However, if you push for too many price breaks, they might start to cut corners. Quality, on-time delivery, and customer service might suffer, so the supplier can meet your requested lower price. Is that what you really want?
Developing partnerships with your suppliers can be a key strategy to help them reduce costs without making sacrifices.
Here are some simple ways to build relationships with your suppliers that are based on more than price.
On the other hand, if you treat a supplier as a commodity, they will not feel like a partner and may be more reluctant to pass cost savings onto you. Remember, time is valuable, and your procurement people should be working to improve the supply chain, not tying themselves up with time-consuming price negotiations. They might be able to shave a few pennies off the part by applying pressure, but if you have an open and sharing relationship with the supplier, they may come to you with cost savings.
You rely on your suppliers, so why not make it a partnership instead of a pricing game?