I’ve said it many times before: I’ve nearly stopped reading books on purchasing and supply chain management negotiation strategies because there’s very few good ones.
That’s why I’ve penned my own. It’s why I pretty much exclusively consume sales books on negotiation strategies…so that I can get counter intelligence.
Counter intelligence is quite the concept. It’s of great value in our profession.
Let’s focus on “Supplier Nibbling” for a moment.
What is Supplier Nibbling? Picture a mouse nibbling on a piece of cheese. Even better, picture the person who eats multiple thin pieces from a cake, hoping that no one will notice they’ve eaten half the cake.
Nobody does notice, sometimes. That’s the thought behind Nibbling.
Nibbling happens where you’re unsuspecting it. A car dealership sales manager told me that’s how they make the majority of their revenue.
If you focus too much on things such as base cost or monthly payments, the dealership will sneak in costs where that you notice.
Nibbling may sound cute and unimportant, but in the real world, it can be like a Las Vegas buffet for your suppliers if you don’t stop it.
If you focus most of your attention on price, nibbling will then happen everywhere BUT price. The objective is to nibble without anyone noticing, (like the cake example).
So suppliers will change course on the pack and agree to a price that makes you happy. Your guard is down and you’re starting to claim victory deep inside. Meanwhile, they are just getting warmed up.
The supplier will start trying to slip in costs for everything. Late payment penalties, adders for various product features, warranty deductibles, change order costs, replacement parts and spares, overtime, and everything they can think of.
Plus, there are costs that they don’t make part of anywhere that they know your customer will become subject to later. Those are the worst of all.
For example, buying software (and getting an awesome price on it) and then finding out later that your customer has was met with a very large consulting and training tab with the supplier – something that never even came up in negotiations.
I know, because I experienced the exact same situation early in my career! It wasn’t fun, I dropped like a rock. That was my first real experience with supplier nibbling.
If you’re using the supplier contract template, you may as well forget about it, and NOT in a good way, because supplier contracts are not looking out for your best interests…It’s going to have all kinds of “supplier goodies” baked in.
A good way you can counter all of this is to have an Entire Agreement clause in your contract stipulating that this is the entirety of the agreement between the parties and any other changes must be done by amendment or addendum.
Show the supplier this clause and tell them you don’t want bills for anything outside of the contract down the line.
Another great way is to catch the supplier trying to nibble and then stating the following:
“Look, it’s in my best interest for you to be successful. I want you to make money, believe me. However, you aren’t going to make money on every aspect of this deal. You need to make money overall, and that’s where we need to keep the focus. The kind of thing you are trying to charge me for here is not something I pay for with other suppliers. This is just part of the cost of doing business with our company. I don’t want to get a bill from you every time I need something from you. So let’s focus on making sure the price we negotiate is all encompassing, okay?”
These are strategies that are preventative in nature and get you in front of supplier nibbling. The first is used as an insurance strategy after the contract is signed (the Entire Agreement contract clause) and the other is used when you’ve caught suppliers in the act of nibbling.
You don’t have to be a victim of Supplier Nibbling. Implement these simple strategies to stop it. When you catch suppliers trying to nibble, call them on it and tell them you want all cost components on the table and negotiated.
All the nightmares that come with negotiating your contracts are totally preventable.
These are YOUR negotiations, be in charge and if you want to learn many more strategies like these so that you THRIVE in your career, be sure to enroll for the BATCH 2020 of the game-changing CPSCM™ certification program which will be led live from November 16-24 ON YOUR SCREENS!
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Be your best!