6 Ways to Create Leverage With Suppliers and Increase Your Buying Power

By: CenterPoint GPO,

Are you having trouble getting the best deals from your suppliers? If so, it's probably because your buying power isn't as strong as it could be. There are many ways to increase your buying power, but some have serious drawbacks that can compromise the quality of your purchases or even put you out of business entirely. Here are six ways to create leverage with suppliers and increase your buying power without sacrificing anything important in the process.

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1) Negotiate Pricing to Create Leverage With Suppliers

  • Understand what drives their costs. Before negotiating the price, you need to understand the cost structure of the goods or services you're procuring. This includes both direct and indirect costs. Indirect costs are overhead expenses the supplier incurs to do business, such as rent, utilities, insurance, etc. Once you understand these costs well, you can negotiate more favorable prices for your company. 
  • Know their competition. Knowing the supplier's competition and what they're charging for similar goods or services is essential. This will give you a good starting point for negotiating prices. 
  • Understand their margins.

2) Negotiate Payment Terms

One way to create leverage with suppliers is by negotiating payment terms. This can be done by asking for an extended payment period, which will give you more time to pay the invoice. You can also ask for a discount if you pay early. Additionally, you can try to negotiate a line of credit or extended payment terms. Doing this allows you to free up some cash flow and have more working capital. Ultimately, lower prices can pass these savings on to the company.

3) Establish Terms & Conditions for All Purchases

As a procurement professional, you should always establish purchase terms and conditions. This will help you maintain leverage with suppliers and increase your buying power. Doing this ensures that all purchases are made on your terms and that you're getting the best possible price. Plus, it'll make it easier to negotiate better deals in the future.

4) Create Leverage With Suppliers By Having a Plan for Tracking Costs and Evaluating Value

  • Understand your current spending.

    Knowing where your company is spending its money is the first step to finding ways to save. Work with your procurement team to clearly understand your current supplier spending
  • Determine what you want to track.

    There are several different ways to track supplier costs. Choose the metrics that make the most sense for your business and give you the most insight into areas where you can save. 
  • Set up a system for tracking costs.

    Once you know what you want to track, set up a system. This could be as simple as creating a spreadsheet or software tracking supplier costs.
  • Start tracking costs.

    Begin tracking the metrics you selected in step 2 regularly.

5) Get Approval from Senior Leadership

Are you a procurement professional looking for ways to create more leverage with suppliers? If so, you're in luck. This blog post will share six ways to increase your buying power and get the best deals from suppliers. But first, let's get approval from senior leadership. They have the final say on all procurement decisions, including approving new supplier agreements. It can be hard to go over these 6 points when speaking with leadership without sounding like an expert or someone telling them what they should do. 

So Here Are Some Talking Points That Will Help

      1. You want to make sure it is worth the effort of creating leverage (when there is little left). 
      2. Increasing leverage could save money in other areas because it would help avoid paying too much for a particular item or service. 
      3. Other organizations have created their own methods of working out agreements with suppliers and giving them only one or two items on contract at a time.

6) Educate Key Team Members About the Process

As a procurement professional, you know that one of the best ways to increase your buying power is to create leverage with suppliers. But what exactly does that mean? And how can you do it? First, it may be helpful for procurement professionals to educate key team members about the process. For example, explain how leveraged purchase orders give more value in negotiations than straight-line purchase orders. 

Additionally, point out when this strategy may be necessary—for example, when there is little or no current leverage left with a supplier.

Learn More About How to Create Leverage With Suppliers to Increase Your Buying Power

CenterPoint is an industry-leading GPO and can offer your company a customized, data-driven approach to supplier management that combines collaboration, negotiation, and data analytics to provide the best results. We don't just offer savings, we help you achieve operational excellence by leveraging power where it counts: Negotiations - CenterPoint negotiates on behalf of hundreds of companies, often delivering better deals than what our members could negotiate on their own.

Contact us today or visit our website or follow us on Twitter to learn more about how we can help you create leverage with suppliers and increase your buying power.

 

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CenterPoint Group provides discounts to key suppliers such as Office Depot, Travel Leaders Corporate, W.W. Grainger, Verizon Wireless and more...

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The information contained in this article is intended for general information purposes only and is based on information available as of the initial date of publication. No representation is made that the information or references are complete or remain current. This article is not a substitute for review of current applicable government regulations, industry standards, or other standards specific to your business and/or activities and should not be construed as legal advice or opinion. Readers with specific questions should refer to the applicable standards or consult with an attorney.

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