Are you asking your suppliers to get creative with incentives for your business?
Today’s post is by your SafeSourcing Team.
It’s an old saying you’ve probably heard a million times, “You don’t know unless you ask.” Usually another saying goes right with it, “What’s the worst thing they can do, say ‘No’?” There are so many situations this can apply to and our space in procurement is no different. As departments work harder and harder to control their prices with suppliers, eventually a point comes when the costs are as low as they can go before the suppliers make no money. That is when it is time for companies and their suppliers to get creative.
Today, we will look at a few areas you can use to work with your suppliers to generate additional value that is outside of the cost of the goods and services they are contracted to provide today.
Cash Incentives – Like most good companies, driving more sales is a key to being successful. The more business a company is willing to give a supplier, the happier they are. To that end, many suppliers are willing to offer cash incentives for activity, such as an increase in length of contract, volume of spend, better payment terms, etc. The problem for their customers is that those programs are not always common knowledge, and many times are only given when the customer asks for it. Requesting details on incentive programs in RFP/RFQ projects will give insight into what suppliers are willing to offer when they get an opportunity for more business.
Blocks of billable hours – Contracts are tedious, long, complex documents that many people outside of lawyers have never fully understood, much less read all the way through. Included in most contracts, somewhere in an appendix, is a list of billable hours should something occur outside of the scope of the work that has been contracted. These not only protect the supplier from having to do hundreds hours of work for free, but also are hours that can and do happen, otherwise they would not be in the contract. One of the biggest charges is for custom reporting and development, which can range from $150 to $300 an hour. This is an area that can also be improved upon and many companies are willing to compromise on when a customer requests 100 hours of free custom work as part of the deal. At $300 an hour, that is an additional $30,000 in value to the company.
Additional Services – Much like asking for blocks of billable time, many times customers don’t try to negotiate other billable services, such as installation and configuration. These services generally show up on the proposal as a line item with costs attached to it, but many times these are areas that vendors are more willing to negotiate. Knowing the category, and getting advice on which pieces are the most likely to budge, is an important part of getting these fees. It can come from an internal team or from outside consultants. Once again these are services with costs that should be realized as additional savings.
For more information on how SafeSourcing can assist with ideas for other areas to create increased value on your projects or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.