Stop Negotiating the Best Contract Terms

By negotiating the best contract terms with your supplier for a long-term contract, you may be increasing your company’s costs. But how can that be?

The Buyer Wants the Best Price

All things being equal, a buyer will optimize the best business terms and conditions (including price) for the acquisition of goods and services. To their credit, buyers can get incredibly creative when negotiating with suppliers to optimize these parameters.

For example, by conceding to supplier goals in negotiation (shorter payment terms, financing preferences, payment methods, etc.), a buyer could lower the unit price by a few additional basis points. And, unless you have company guidelines in place, deal terms and conditions can get very interesting as a result.

Over the years, as I've worked with clients on scaling up their procurement solutions, I’ve seen everything from volume-based scale pricing to pricing based on tons of finished goods produced to pricing based on the day of the week of purchase. But, if that's what yields the best prices for the business, what’s the problem?

Subscribe to Premium to read the rest.