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
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.