Enhance Your Vendor Relationships with Common Negotiation Techniques

Prime Vendor: Getting the Most from Your Most Important Supplier

By Jeff Girardi, HIDA

In both my professional and personal experience, I’ve learned that communication and trust can be foundational elements for building successful long-term relationships. Both are essential when setting up new vendor partnerships, but it doesn’t end there.

At AHRMM’s 2018 conference, Andy Motz, AVP, Consulting, HealthTrust, outlined 18 techniques for supply chain managers to improve their vendor negotiations. As I listened, I realized providers can get even more value from their ongoing purchased services and commodity agreements by taking a more proactive approach to negotiations.

Among some of the insights I learned:

  • Make a commitment ahead of time to find or be open to mutually beneficial approaches to negotiated agreements. Your goal may be to achieve product cost savings or a better service level from your partner. But are you willing to accept a price increase if it’s proven to be justified or required to achieve your desired outcome?
  • Determine what your range of acceptable possible solutions offered by your item or service provider is prior to your conversation. If you’re reviewing a service contract, is your vendor expected to perform services during standard business hours only? Are you willing to contractually define what constitutes standard business hours?
  • Use data to try and predict your vendor’s responses ahead of discussions. In the service contract example above, for instance, it might be helpful to know what’s the standard hourly wage typically paid to maintain equipment. Industry benchmarks, RFPs, and available item list prices are great resources to help you evaluate your vendor agreements, says Motz.
  • Test your negotiation strategy with colleagues or subject matter experts ahead of time. One of your physicians may have a higher cost per widget than others, Motz explains, but everything you buy may be coming from the same distributor. If you can determine in advance why this variance is occurring, you and your supplier can spend valuable meeting time working through the issue rather than identifying its root cause.
  • Set and communicate your agenda ahead of time. It’s okay to say, “We’re going to have this conversation at this date and time,” Motz adds. “You can bring two people because I’m going to bring two people.” Decide if you want to share your negotiation points prior to a face-to-face meeting. It usually leads to a quicker resolution and you can hammer out the tougher details in person.
  • Look for opportunities to break down barriers, even artificial ones. Studies show likeability leads to better services and better prices, says Motz, so even something as simple as where you sit during your meeting could influence the tone of the conversation. Rather than sitting across the table, consider sitting on the same side as your distributor but with a space buffer between you two.

There’s no limit to the negotiation tactics you can use to get more value from your suppliers, but it’s important to try and problem-solve wherever possible. “At a minimum, the work you put into preparing for negotiations is as equally important as any live discussion,” explains Motz.

In nearly all cases, it’s best to adopt a “win-win” mentality in order to keep the dialogue positive and productive. By embracing a strategy that encourages communication and transparency, you may start hearing more “Yes” responses to your requests and even learn something new about your most trusted distribution partner.