Negotiation countdown 2019:
You are looking for a financial advantage in the end of 2019? You want to begin 2020 with a head start over your competitors? Our quick and easy methods will provide you with great savings and a strong finish of the year.
Seize your opportunity now: Demands and commodity prices are falling, and it is your turn to capitalize on expiring contracts with renegotiations. Find out how our strongest methods, supplier conventions, direct negotiations and supplier sourcing, can grant you access to a million euros in savings.
Supplier conventions: A million euros in a day
As one of the most powerful tools in the Kloepfel repertoire, supplier conventions allow six to seven-digit savings in only eight to ten weeks. As usual for Kloepfel projects, our fee is 100 percent success dependent.
But what makes a supplier convention any different from a supplier day? While a supplier day mainly focusses on exchanging information and strengthening relationships to active suppliers, the supplier convention creates savings which are effective immediately. Exemplary ways of generating savings on the day of the event are refunds, credit vouchers for pending order volume, loyalty bonuses as well as instant price reductions and optimized conditions.
Long-term price reduction methods like Design-to-Cost are less important in supplier convention projects. While they are taken into consideration for mid- to long-term savings, it is the short-term effects that are crucial for the success of a supplier convention.
Preparation is key
Prior to a supplier convention event, our analysis of potential defines the most profitable needs, leverage opportunities and order volumes among all commodity groups. With minimal effort, you receive a transparent overview of your saving potential and a step-by-step description of the following process.
Then, the suppliers are evaluated and the most promising ones, both existing and new suppliers, receive an invitation for the supplier convention. In order to maintain a competitive setting between the suppliers, the commodity group markets for the convention are structured as representatively as possible. This applies pressure on the suppliers and strengthens your leverage.
Ultimately, the supplier convention aims to obtain negotiation results on the day of the event.
A coherent storyline is also of enormous importance for this new negotiation format. We use the storyline to mediate internally as well as externally why, how and with whom we conduct the conventions. Before the face-to-face meetings with the suppliers begin, this story is presented to the plenum with intend to inform and involve the suppliers.
In order to achieve the best possible negotiation results in the discussions, Kloepfel Consulting works out a separate booklet for each supplier in close coordination with the customer. In addition to the most important figures, data and facts, this booklet also contains market- and index-related correlations and influences. In this way, the own position and that of the negotiating partner are best understood in order to derive a suitable negotiation strategy. Among other things, the following information is recorded in the booklets:
- ABC analysis
- Benchmarks
- Negotiation goals
- Negotiation arguments of the supplier and possible counterarguments
- Product group-related allocation scenarios
- Correlation raw material index/price/quantity trend
- etc.
Based on these analytical principles and hard facts, high quick wins can be achieved. By using this concept, we have been successful with most suppliers.
In addition to the hard facts, the human factor also plays a central role. That is why our consultants meet with the customer’s buyers several times in advance. On the one hand, to discuss the procedure (distribution of roles, etc.) and on the other hand, to merge as a team. The supplier then has a strong negotiation team with a conclusive story at his disposal.
At the end of the negotiations, the agreed prices and conditions are confirmed and signed by the suppliers.
Astounding potential for indirect procurement
Oftentimes, the indirect procurement area tends to be overlooked as buyers do not expect high savings to be available here. However, that is exactly why the indirect procurement’s potential is enormous. Purchasers are often too busy with the central procurement goods which leads to indirect areas remaining unchecked. In some companies, indirect goods are not even subject to purchasing, but are directly ordered by other departments (marketing, IT, assistants, etc.). This often leads to contract extensions without the conditions being checked and negotiated.
Numbers say more than words. These are the typical savings of a Kloepfel project for indirect demands:
- Temporary employment: 6% bis 18%
- Office supplies: 15% bis 40%
- Energy: 2% bis 10%
- Facility management: 8% bis 20%
- Vehicle fleet: 5% bis 20%
- IT / TK: 5% bis 20%
- Logistics: 4% bis 15%
- Marketing (inkl. printing): 7% bis 25%
- MRO: 9% bis 16%
- Professional Services: 6% bis 14%
- Packaging: 6% bis 25%
- Insurance: 15% bis 30%
Face-to-face negotiations
The order situation in many sectors is deteriorating and the prices of many raw materials are falling. For buyers, on the other hand, seller markets are turning more and more into buyer markets. In a recent survey conducted by the Kloepfel Group, 40 percent of medium-sized buyers state that they want to recover the negotiation losses of recent years from their suppliers. On the one hand through negotiations with existing suppliers or the sourcing of new suppliers, for example through tenders.
The suppliers will hardly be able to deny the falling demand and falling raw material prices in the current annual talks. In addition, many companies have been able to increase their profitability and reduce costs in recent years, for example through digitization or the outsourcing of work to Eastern Europe. There have certainly been some partial increases in prices, such as energy prices. As purchasing consultants, however, we can confirm that the costs of most companies have fallen overall and will continue to fall.
But you must be able to prove this to your suppliers during the negotiations and prepare accordingly. However, according to the Kloepfel survey, three-quarters of those surveyed lack the time and manpower to do so. While the negotiation itself might only last an hour, careful preparation and follow-up takes time. This also applies to the sourcing of new suppliers. Here, the negotiation professionals from Kloepfel Consulting can ideally support you in sourcing and establishing new suppliers or in preparing negotiations.
Solid demand forecast for 2020
A major problem for many buyers at the end of the year is that they do not receive a solid demand forecast from sales and production. Due to that, they must derive figures from the past in order to predict future demands, which is often better than no demand forecast at all. In addition, many buyers must ensure the availability of important products and services for the next year. However, due to a lack of time and transparency, quotas are negotiated instead of covering real needs and keeping inventories lean.
However, the more precisely the requirements of the various departments can be planned, the more specifically buyers can spend budgets and negotiate prices. Therefore, solid demand planning should not be underestimated as a valuable savings lever in the end of the fiscal year.
Refunds in annual talks 2019
The topic of reimbursements in the annual meeting also needs to be well prepared. Ideally, with just a few mouse clicks, you can check which sales you have made with which supplier and for which requirements.
The more sales a supplier achieves with you, the more he will usually be prepared to pay you in immediate refunds. For example, higher sales revenues ultimately also enable the supplier’s purchasing department to achieve higher volume effects in the procurement of raw materials or packaging.
But even these figures must first be made visible. Due to the lack of master data management, however, this is often hardly possible or not possible at all. This is where the experts at Kloepfel Consulting can help you to make your purchasing transparent.
Framework agreements: Using quantity effects
On the one hand, you reduce costs with framework agreements through fixed purchase quantities and secure the supply of goods to your company. On the other hand, your supplier can better plan his production and achieve savings that he can pass on to you. For example, he can plan raw materials with his suppliers much more proactively. In addition, he can pre-produce and better plan to utilize his full production capacities. Setup times and the resulting costs are significantly reduced. Your advantage in turn is that your replenishment times are also significantly reduced. In addition, inventory costs and inventories sink.
Moreover, the Kloepfel Group has qualified thousands of suppliers in over ten years and has thus been able to build up the most ideal suppliers at the best price. We have concluded framework agreements with these suppliers for various indirect requirements ranging from Voiced Data to office supplies, tools as well as packaging and we regularly renegotiate these agreements. Our customers can join these framework agreements and benefit from very high volume and bundling effects in an uncomplicated way.
On Top: Digital purchasing alliances
In addition, there are the exclusive digital shopping platforms of the Kloepfel Group via which you also benefit from volume effects due to the high order volumes. Here, you can dock on and achieve savings in a very short time.
We bundle product ranges and catalogues with strategic suppliers. This gives your purchasing department access to stable conditions and a reliable logistics infrastructure. For your own catalogue solutions, we provide you with your individual and tailor-made assortment.
Almost 99 percent of your B and C requirements are covered directly by our bundled assortment. If you cannot find the articles you are looking for, please enter your purchase requisition and our special procurement team from Kloepfel Services will take care of it.
Medium and long-term measures
There are many other medium to long-term measures to optimize your purchasing conditions and prices sustainably. For example, through the standardization of products, the qualification of your employees, the reduction of product costs through product cost calculations and make or buy analyses, the optimization of purchasing processes and strategies or the outsourcing of purchasing activities, to name just a few.
Discover your savings potential in just one day
As part of a professional one-day potential analysis, we can take a closer look at your indirect and direct purchasing and give you concrete numbers that we would like to achieve with you this year. Your effort: 1 day
Visit us at the BME Symposium
You will find us at the BME Symposium at booth B8 in the Foyer Potsdam. Under the following link you can make an appointment today on your desired topic.
Arrange your personal appointment
Author
Thomas Wandler
Senior Partner
Kloepfel Consulting
Author
Kadir Yildiz
Senior Consultant
Kloepfel Consulting