When the elephant in the room is your supplier!

Unless your company is one of the largest companies in the world, chances are your procurement team will eventually have to deal with suppliers that are larger than your company. You are the elephant in the room.

In a role like procurement, where negotiation is a central part of the role, leverage is a crucial element in those negotiations. And in many cases, size means leverage.

So how do you negotiate with a supplier that is larger than your company and has a greater perceived impact?

How do you negotiate when your supplier is the elephant in the room?

What makes your supplier an elephant?

No matter what industry you’re in or where you’re located in the world, chances are you have suppliers that are larger than your company. By “large” we mean primarily revenue, but it could also include market cap, geographic reach, cash flow, growth rate, or number of employees.

It’s also worth noting that the uniqueness of the products (or services) your supplier offers could also make them “great”. You are the elephant in the room. For example, if they supply custom components or materials that only they can supply, you have no choice but to use that supplier. They are your only source and you have no choice but to buy from this supplier.

When the materials or goods your supplier provides are allocated due to resource constraints, capacity limitations, or other reasons, your supplier has the upper hand. It’s a simple matter of supply and demand. When demand exceeds supply, your supplier can decide who to sell their products to.

It is also worth noting in the outsourcing industry that while you are purchasing goods from these suppliers, your customer is making the sourcing decision. If you are an outsourced manufacturing or procurement company, you experience this all the time. And because your customer made the sourcing decision, your supplier often recognizes your customer and not your company. This greatly complicates dealing with them in negotiations.

And let’s not forget ego. I’ve seen many suppliers grow rapidly and have wild success. Your company, brand and products are hot and in high demand. But in far too many cases, that means these companies think they’re the greatest thing since sliced ​​bread. Their perceived superiority (which usually doesn’t last long) influences their approach to negotiating with clients.

How do you eat an elephant? One bite at a time!

Because at some point you will have to deal with these elephant-in-the-room suppliers, it is important to recognize them and develop strategies and techniques to deal with them and ensure your negotiations are successful.

Without a strategy or plan of attack, these suppliers will certainly trample you and everything else in their path, believing they will pull through without a hitch.

Here are some of the techniques we think are appropriate for dealing with elephant suppliers:

Build the relationship!

A strong, positive relationship is absolutely essential. A great relationship will get you through a lot of troubles. A bad relationship will only aggravate and deepen all problems.

People like doing business with people they know.

Spending time meeting up with suppliers after work hours for dinner or meeting at the bar, for example, can be a great opportunity to build personal but professional relationships. It can give you and the supplier a chance to get to know each other and form a bond. People like doing business with people they know. Although it can be a big investment of your time, it will usually pay off in the long run.

This may also require building relationships with people other than the sales/account reps that your supplier introduces you to. If you find these people to be unreasonable, developing relationships with others at a higher level in your supplier’s organization may lead you to people who are more reasonable (or not) or more positive influencers.

Don’t be intimidated

Depending on who you’re dealing with, suppliers will sense that any sign of weakness on your part will further strengthen their position. Especially when the elephant in the room is your supplier.

If you lack confidence, are overly respectful, or show signs of nervousness or bad body language, your suppliers will resort to it.

Just because the logo on your supplier’s business card is more familiar or popular than your company’s logo doesn’t mean they’re smarter.

Your expertise and experience is what will make the day. Be confident and be confident.

Be prepared

In all respects, do your homework before entering into negotiations with an elephant supplier.

You should understand every aspect of your requirements, your supplier’s situation, benchmarks, industry trends and more. Be it prices, product features or conditions, you should have detailed analysis at hand.

This should also include learning as much as possible about the supplier, its competitors, its business pressures, internal organizational lines and supplier relationships.

Your supplier contacts also have their own goals. By understanding what those goals are, you may be able to find a way to help your suppliers achieve their goals, which in turn will help you.

Focus on facts, performance and objectivity

When dealing with a supplier, certainly with an Elephant supplier, it is always best to be objective and focus on facts and performance in any conversation.

Staying away from subjective gossip and boasting on behalf of the Elephant supplier can be achieved by focusing on irrefutable facts.

What is your delivery performance? What is your product quality? How do they compare to competitors or benchmarks?

Presenting this data/information to a supplier can help them see and understand facts and ideally disarm them from their perceived premier position. This is especially strong when their operational performance isn’t as stellar as their ego would like them to believe.

Focus on facts! Be objective!

Look for alternatives!

In my experience these elephant suppliers come and go. Any company that is at the top today will have problems tomorrow and vice versa. It’s only a matter of time.

But in the meantime, it’s crucial to continuously look for alternatives. Even if your supplier is only from one source, there may be times when another company has developed materials that can be used as a substitute. There is almost always someone around the corner.

This is consistent with preparation. And if you have your ear on alternatives, your ability to properly inform your suppliers about them can potentially help strengthen your relationship and trust with them. But if they don’t accept your help, they undermine their position in the future.

Elephant in the Room Conclusion

If you’re in procurement, you’ll likely have to deal with elephant suppliers at some point, meaning suppliers that are larger than your company. It’s inevitable.

It is indeed a tremendous opportunity for procurement professionals. When your procurement team has the upper hand with suppliers, the job is a little easier and doesn’t challenge your skills.

But when you’re dealing with suppliers who have a bigger impact, then this is a real test of your ability to use your expertise and techniques to create win-win results with these bigger suppliers.

Originally published February 26, 2019.

Leave a Comment