What’s up for Negotiation?
Read Time: 3-4 minutes
Step 4 of the CLEAN Framework is all about AGREEing commercial terms. Today, I’m going to show you how to unlock the full potential of negotiations in the chemical supply chain, far beyond the obvious factors like price.
As a buyer of chemical raw materials and ingredients, negotiation is a critical skill that can make or break your procurement success. It’s not just about getting the lowest price though. Focusing on various aspects of negotiation can help you create better deals that benefit your business in the long term. When you look beyond price, you give yourself the opportunity to form partnerships that deliver more value, flexibility, and security.
Most people fail in negotiation because they get fixated on price alone. They miss the opportunity to negotiate on terms that could actually save them money in other ways, like improved payment terms or enhanced market knowledge. By focusing on just one aspect, they end up with deals that are incomplete and miss out on significant benefits.
Key Takeaways:
Negotiation goes beyond price
Explore all negotiation options
Strengthen your negotiation position
Focus on long-term value
Build trust with suppliers
"You don’t get what you deserve, you get what you negotiate."
– Chester Karrass
Negotiation goes beyond price
Price is often the first thing that comes to mind when people think of negotiation, but it's only one piece of the puzzle.
Think about the many other factors that can influence the value of a deal. Can you negotiate around contract length to lock in prices for longer? Can you get more favourable payment terms that improve your cash flow? Or perhaps you could negotiate for market knowledge - like receiving regular updates on feedstock prices or industry trends.
These are all factors that can be just as important, if not more so, than the price itself.
Explore all negotiation options
It’s essential to understand that nearly everything is up for negotiation.
Price might be the starting point, but from there, you can negotiate contract length to provide more stability or flexibility. Stocking agreements, like consignment stock or third-party storage, can improve your supply chain resilience. Payment terms can be adjusted to better suit your financial situation, providing more breathing room. Even quality specifications and market knowledge (as I’ve already mentioned) can be negotiated to give you an edge in decision-making.
Other areas you might not have considered include rebates for bulk buying or longer-term contracts and public relations opportunities. Could you ask your supplier/customer for testimonials, marketing support, or PR materials to boost your brand?
These elements can bring a wealth of value that goes far beyond price reductions.
Strengthen your negotiation position.
When you approach negotiations with a broader view, you instantly strengthen your position. It shows that you understand the bigger picture and that you’re looking for a win-win outcome.
Suppliers appreciate this because it often means a longer-term, mutually beneficial relationship. It also allows you to shift the conversation away from simple price cuts, which can strain a relationship, and towards creating a partnership that delivers value to both sides.
Focus on long-term value.
Short-term savings might feel good initially, but focusing solely on price can be a mistake. By negotiating on multiple factors, you can secure long-term value that protects your business from sudden market shifts or supply chain disruptions. A longer contract might provide price stability in volatile markets, while consignment stock could prevent costly delays. Rebates for bulk orders might not impact your immediate budget but will save you significantly over time.
Build trust with suppliers.
Finally, by taking a more comprehensive approach to negotiation, you’re not just haggling, you’re building trust with your suppliers. When both parties feel they are getting value from the deal, it strengthens the relationship, making future negotiations smoother and more collaborative.
This also means your supplier is more likely to go the extra mile for you when needed, whether it’s providing critical information or prioritising your orders.
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So, there you have it.
Negotiating in the chemical supply chain is about much more than price.
By broadening your perspective and considering factors like contract length, stocking agreements, payment terms, and more, you can secure deals that benefit your business in both the short and long term.
Start applying these principles in your next negotiation, and you’ll quickly see the difference it makes to your bottom line – and your supplier relationships.
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Thanks for reading, and see you next week.
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