After task to sign POs with Vendors is received, Purchasing Person MUST negotiate the prices. Prices have to be negotiated for every single order.
Before negotiation Purchasing Person must define the currency of the future order. There are several factors involved in this process, which are described in the SOP Order Currency.
Negotiating tactics vary and may depend on the Purchasing Person. Below is the negotiation process with the most common negotiation tactics:
Review all the details of the new order, confirmed products, confirmed quantities, all Vendors/prices quoted.
Choose the best Vendor for the specific order, make sure that all possible Vendors were asked to quote. If some Vendors prices are missing, ask those Vendors to quote and then choose the final Vendor with most suitable price/quality ratio or taking into account other considerations (such as delivery time, Error Rates of the Vendors, overall difficulty to work with a Vendor, etc.). Purchasing Dept. makes the final decision which Vendor to choose, regardless of the which Vendor was chosen by Salesperson in the sales quotation. If the final prices of the chosen Vendor for some reason is higher than price in SO Purchasing Person needs to report the problem to Purchasing Dept. Manager and Salesperson.
Decide target prices by choosing one of the sources:
a) Previous order prices;
b) Deduct 10% from the quoted price;
c) Check Quotes history and use the lowest previously quoted price;
d) Ask Purchasing Dept. Manager;
e) Ask the Vendor how much they can reduce the price and determine a lower target price to ask for.
Once target price is determined, give it to the Vendor. When giving target prices to the Vendor Purchasing Person needs to provide an incentive to meet the target prices. If there is no incentive or motivation to give to the Vendor, then Vendor salesperson has no reason to meet the target price. Few ways to give incentive:
a) Inform the Vendor that if the target price is met PO will be sent to them immediately and order will be confirmed;
b) Inform the Vendor that your manager informed that he/she will only accept this target price, please help to confirm the order ASAP;
c) Inform the Vendor that this is the market cannot accept higher price than the target price;
d) Inform the Vendor that this is just a first trial order for market entry, future orders will follow with bigger quantities so they need to help you meet the target price.
If Vendor is not replying quickly, urge the Vendor by multiple follow ups via QQ/Email/Skype/WA/Phone etc. to confirm the price as we want to start the order ASAP.
Once the final price is confirmed by the Vendor, Purchasing Person can move forward to the next step of the process – Upload Renegotiated Prices. Purchasing Person should not confirm anything to the Vendor until Purchasing Dept. Manager has approved Renegotiated prices. Negotiation process should not take longer than 1-2 days, preferably several hours.