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Do you BEAT UP your vendors or PARTNER with them? - HECO

August 21, 2017

Everyone who deals with vendors has a choice to make. Should you beat them up and show them “who’s boss” or should you partner with them in the spirit of cooperation? Which one do you choose? Can you do both?

There are a lot of articles on managing vendor relationships, many people much smarter than i am write articles and books on this topic. However, there is a fundamental, philosophical choice that I see companies (and individuals alone) make when dealing with vendors. Are they open and honest and treat their vendors as partners in advancing items at their location? Or do they constantly demand more and more of the vendor and want to pay less?
Getting a good deal is obviously something we all want. A good deal for the total quality you receive is especially a good thing we all want. I’m not saying in anyway that you shouldn’t negotiate with your vendors in order to get a better price. You should, as a buyer that is your job to ensure you are getting the best price. However, I have seen buyers do this a number of ways. I have seen buyers that simply say your price is out of line and that you need to reduce it by 10%. I have also seen buyers that take the extra time to ensure that the prices they are comparing are apples-to-apples. We have found that the buyers that take their time and compare apples to apples end up saving more money for their company in the long run.

Here is a real life example. Since I’m in the motor business, we will use a motor repair example. A buyer is looking for bids on a motor that they will be sending out for repair in the upcoming weeks during a scheduled shutdown. He sends a picture of the nameplate to two motor shops and says that they should quote a rewind on this. He gets his quotes back and selects the less expensive option. Then he calls that less expensive option and tells them that they are really close but they need to lower their price by 10% in order to get the order. The vendor wants the business so they do that and the buyer saves his company some money. For ease, let’s say this is a $2,000 savings.

Great! a $2,000 savings! That should make the bosses happy! Well… let’s step back a little bit, what did the two vendors quote? A rewind at two different repair shops can be two different repairs. Do both vendors utilize a Vacuum Pressure Impregnation (VPI) tank? What resin do they use in the tank, polyester or epoxy? Are both vendors using VFD approved magnet wire? Can both shops fully power the motor at nameplate voltage and no-load current after the completed rewind?

These are all vital questions that a skilled buyer should know the answer to, for this individual situation. Now, let’s say that they shop that won the order didn’t have a VPI tank and only could partially power the motor at test and the shop that lost the order did. The shop that lost the order was providing a significantly different end product than what the shop that won the order.

The end question is, which one would last longer? Which one would yield more long-term savings to the plant? If the motor repaired by the less expensive option lasts 1 year and the one by the more expensive options lasts 5? It would take a big price difference to justify repairing something 2 or 3 times compared to just the once.

The buyer had two options to choose from. Partner with a company that does things a specific way or beat up the vendors and end up choosing the least expensive option. Not that the least expensive option is not right for you, just understand what you are getting!

Partnering creates long-term relationships where vendors typically go above and beyond for you. You can be honest with each other and discuss pricing openly. Beating up vendors creates a hostile, shorter working relationship and vendors doing the bare-minimum to meet their purchase order obligations. Which do you want?

Posted in Product Sales

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