Do you prioritize overall value or push vendors hard for savings?

Cost savings is the goal for every procurement professional, but how do we go about it is also equally important.

I always get told by my managers that you should always “break the vendor” and squeeze every bit of currency out of them.

At my organization if a buyer gets a discount of 8%, that is seen as being “too nice” towards the vendor unless the savings is 17% and above.

So how is procurement generally practiced at your organization?

Question: Do you strive for an overall value even if the savings is not significant enough, or do you hammer the vendor/suppliers to the point they give up?


AIMDRIVE-AI Solution:

Effective procurement is about more than just aggressive cost-cutting — it’s about strategic sourcing and maintaining strong supplier relationships in order to have suppliers help you achieve better-than-average cost efficiency. While price reduction is important, pressuring suppliers too much can lead to quality issues, supply disruptions and distrust. Instead, a more sustainable approach involves price optimization through Price Analysis and Cost Analysis, rather than just demanding deep discounts without basis.

1. Price Analysis: Look at benchmarks related to the trend in price changes over time. This helps determine whether supplier pricing aligns with market trends. Comparing supplier proposals against historical price data and market shifts ensures that pricing is fair and competitive.

2. Cost Analysis: This is especially relevant and a must-do after Price Analysis, particularly for purchases where industry benchmarks are unavailable. A Should-Cost Analysis breaks down a supplier’s pricing into material costs, labor costs, overheads, and profit margins, allowing procurement teams to negotiate based on real cost structures rather than arbitrary discount targets. This method supports the development of a joint understanding with your supplier of the underlying factors that affect cost. Understanding these factors will usually help you ask the right questions and challenge your supplier on what could be done differently to achieve a lower total cost. It may point to options that you are in control of as a customer.

AI tools like AIMDRIVE-AI (Free) help procurement teams conduct these analyses efficiently, ensuring data-backed negotiation and collaboration instead of unsustainable cost-cutting. Read more here: https://aimdrive.com/solutions/price-increase-request/

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