Price Negotiation: Don’t Walk in Blindfolded

I am going to share how some customers are using Lytica tools to save money; big money.  If you buy or sell electronic components, you need our tools.

Anyone requesting or receiving quotes for components today needs Component Cost Estimator (CCE). Clients are using CCE to verify quotes when received. It is fast (analysis takes about 1 minute for 500 components), efficient and, for $2.00 per component, it verifies that their quoted price is fair relative to the market price. It enables them to reject out of line quotes and send them back to suppliers with a suggested target.

Buyers have learned that the prices we predict are accurate and reflect what they should pay; they can quickly separate properly priced components from overpriced ones. Clients can focus their time and effort renegotiating out of line priced devices instead of wasting time on properly priced ones. Our experience shows that improperly priced components are typically priced 30% higher — sometimes more — than they should be.

Before Component Cost Estimator, early adopters were using distributor website pricing and discounting it by some factor that may or may not have been valid. It was never clear if negotiations left money on the table. Our method compares quoted price to a price based on your demonstrated spending competitiveness.  You can even get your spending competitiveness characterized free-of-charge with a Freebenchmarking.com Silver report.

You can also try Component Cost Estimator for free! Simply register, upload the manufacturing part numbers you are quoting and see the profile of market pricing. Enter your competitiveness level to get your specific price. If you don’t know your competitiveness level, run a free benchmarking report at Freebenchmarking.com.

Are you a component buyer preparing for negotiations? You need Freebenchmarking.com.  Reports provide you with a list of your worst priced components (by part number) along with attainable estimated price target. Clients achieve these targets in negotiation about 80% of the time. Don’t go into negotiations unprepared and waste time negotiating components that are already properly priced relative to market.

Why spend time and resources with uncompetitive suppliers when alternatives exist?  CCE provides cross-references that are high probability alternatives — helping to avoid line down situations and supplier price intransigency. When disaster strikes, save scarce time by instantly identifying likely alternatives to shortage items, including current market prices and fair pricing suitable for your company. If a supplier won’t move on price to a fair market value, get a credible alternative supplier to quote and change the game.

Are you a seller of components preparing for negotiations?  You need Component Cost Estimator for two reasons. Stop wasting your customers’ time with high priced quotes that cost you time to prepare with no chance of winning and prevent low ball quotes that are costing you margin when more appropriate market level quotes would have been acceptable to all.

You can use CCE to analyse your win/loss performance with a customer and characterize their buying acceptance threshold. This threshold, measured in competitiveness terms, allows you to target future quote prices to that customer to optimize both win/loss and margin.

Component Cost Estimator is an essential daily tool for sales and procurement. With online access to CCE you can position to market pricing before ever sending a quote or placing an order.  Greatly reduce the non-valueactivity associated with many types of quotes.

Early adopters of our tools are outperforming their competitors. We see significant improvement in our clients’ competitiveness ratings over short periods as they change their negotiating and quoting style using our analytic data. These improvements go straight to their bottom line. We have never seen a company that hasn’t improved.

Our techniques and tools have been classified as a best practice by our customers. I will be describing some of these in a supply chain management book that I am writing titled “Supply Chain Fundamentals: A Guide for Electronic Designers and Supply Chain Professionals”. The book is being written with active participation from my blog followers and EPS online readers; reader commentary will be used to improve the content and readability.  Every few weeks I will post chapters online under Lytica’s SCM Book Project; I welcome your input.

By Ken Bradley – Lytica Inc. Founder/Chairman/CTO

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: