Secrets on Negotiating One Million Rmb Credit from Suppliers - 2
The saga continues from Part 1
The supplier finance was alerted and complained about the credit provided. They subsequently got worried on the credit risk,and stopped ship our next big order.
Immediately, We cleared the amount we owed. Additionally, we paid all balance in all outstanding orders. In executing this action, we demonstrated our financial strength and created an outstanding credit history. The supplier finance felt that they worried too much. However all this were not our prime objective.
Our objective was to stockpile enough for the upcoming negotiation/battle.
Translation: “Before the soldiers move, the military food moves first.”
It means preparing well for any battle well in advance.
We had moved and stockpile our "Food" / inventories.
We then stop buying, after issuing orders continuously for few months with the amount kept increasing each month.
We are not worried because we had sufficient stocks from this supplier to last us a while.
If you kept buying while negotiating, supplier will felt that you are just asking. They are trained to come out with all sorts of reasons to decline your request. Why? You are still buying!
In this strategy, we make the sales manager happy first. She received excellent sales from us, and most likely had reported to the Boss. This allowed her to claim credit for meeting their sales KPI. Subsequently, the sales manager will have higher targets and expectation of our orders.
Ask anybody which worked in sales. What will happen if your sales drop from a high point to zero? You freak out.
After stop receiving orders for two weeks, the supplier staff called the procurement staff to understand what was happening. Of course, the procurement staff had been prepared before on how to answer.
She started to act surprised and commented that we had paid everything right? (This was to remind the supplier of our outstanding payment record).
Then she started to chat politely, declining to offer any substantial information first. She claimed that the Finance department pressured her for not following company policies. She had been questioned and suspected by her boss for having preferences for this supplier. Thus she could not issue an order at the moment. (Generating sympathy at supplier side)
After a while, she said. "Since we are a friend and you had been helping us like releasing shipment in advance, I let you know a secret. We had been buying from 'Competitor' at a lower price." (Time and Competitor Pressure is Applied)
The supplier was worried and tried to get more information like competitor price and emphasize on past relationship and qualities of their product. She then haggled with the supplier on a price mark which the supplier will not agree. They couldn't reached an agreement.
When the supplier was worried that they had lost the business, we now extended an olive branch. The staff informed the supplier that the Sales Director (me lah) was going to visit suppliers in China. Due to their relationship, our staff had recommended her "Friend" the supplier for the director visits. Of course, the procurement team was accompanying the director on tour.
At that moment, the supplier thought that we wanted to reduce the price. That’s what we want them to feel also! (Not showing our cards). We prepared the presentation of our growth in the product sales and the track record of our purchases from the supplier which was growing strong. History is always valuable in the negotiation.
We timed the whole process and visited the supplier in July, few months before the hot festival seasons in Europe and US markets. I took the responsibility of the Sales Director. I always preferred negotiation on opponent location.
Why? It is a courtesy, and most probably I will be able to meet the person in charge of the company, and evaluate my opponent decision maker.
We role-play different function and prepare everyone on their responsibility. Lastly, we also bought lovely pewters for the seller key person and the staff. (Be Prepare for the critical stage of negotiation).
Let the game began.
We arrived in China, and the supplier had prepared two and drive our team to the plant.
After ice breaking, as the sales director, I started by highlighting our company key achievement and our great plan. We presented great sales forecast, strategies and potential growth of sales in the festival seasons.
We should not just sell to our customer. We must also sell our great future to the supplier. Supplier always like to extend better terms to companies which looks and feel solid, supported by hard data and facts!
I explained that I came to visit the supplier because we treat our top suppliers as our most valuable partners and as partners, we trust them on our business plans. We needed the suppliers to ramp up their production to provide us with products for the festival seasons.
Then the procurement manager took over and highlighted the past performance, emphasizing the total supplier sales and our credit record. At the right moment, I asked why there was a drop in last month order? The procurement manager explained the on the price difference between the supplier and the competitor. Of course, this started the argument and haggling between both parties on price and volume of order. The manager was prep to keep asking for the lower price and not to give in. (Not showing our cards)
As expected, the supplier will not give ground on the price. So, at the right time, I cut in and explain." Why don't we look at this as a partnership between both companies? I agreed that after we had cooperated for so long, the price is not the only factor we need to consider. We need to look at the relationship between our collaboration in such a LONG TIME. The supplier also needs to make enough profits." (Losing on non-objective terms)
Then I offered another olive branch. "From Sales Perspective, I prefer to increase our collaboration with our partners which trusted us, and such we should share our success with them also. Perhaps you guys can look into other terms and conditions. I don't mind persuading the business owner and procurement to agree on this PRICE.. We also want our partner to earn and grow with us. But this needs to be a WIN-WIN situation for both of us here”.
Our sales are growing very fast, and I always had insufficient stock to sell because it kept getting much better. If you can provide us some advance inventories to maximize this opportunity, it will be great! To minimize the risk, we will set strict payment schedule, and from my memories, Finance Department claimed that they always make their payment on time. (Prepared in advance in earlier strategy to remove their concern on us not paying. We already had a good paying history).
If Finance is not doing their job, let me know directly, and I will go after them myself. However, you need to give me something for me to persuade the owner and the procurement to agree to it. (Win on Objective Terms after Supplier insist on Price).
After a while more, we ended the negotiation without commitment and left. Later the owner of the supplier wanted to invite me to dinner, but I declined and claimed that I had an arrangement with other suppliers already. (Prepare to Give Up the Negotiation). Actually I was sight seeing and sleeping haha.
When we were back, we placed some orders and requested a higher credit to pay later and Voila we got it! We obtained a substantial amount of top selling stocks without using our cold hard cash for Festival seasons. Thus unsurprisingly, we were able to improve our sales in short amount time.
However, the story does not end here.
When the MYR drop a lot, the government had implemented some control. The Finance and Procurement coincidentally had some difficulties in cash flow. So, for the first time, we delayed the payment for few weeks. I prepared for the consequences.
The supplier contacted me, complaining on not getting paid. I had to act surprised and promised to investigate next working day. On the next working day, procurement staff told them that I scolded both finance and procurement for delaying payment. Then I instructed Finance to executed a prepared sizable payment from UK sales account. (Noticed that we did not pay until they contacted me)
I then explained to the supplier about the government control, and the finance mistake on delaying payment as Malaysia fund was frozen. I thank the supplier for informing me, as the Finance and Procurement did not informed me. Non the less, we had funds in UK sales account and now diverting the funds to fulfill our obligations to suppliers but they need to give us time. Next time, anything, the supplier can just call me for anything. (admission that I owe them one, which build relationship)
From our fast response and readiness, we had further impressed the supplier on our crisis management. They also believed my authority and effectiveness on executing once I heard about their problem. Thus, their confidence level improved after this, and they willingly supply us more.
In fact, I had to stop the procurement from getting too much advance stock in order not to put the company at risk again. At max, it is over One Million Rmb worth of inventories! (Supplier firmly believe that we are partners now)
In the end, it's the trust that produced such results, after a lot of planning and work. We need to be vigilant and make sure we can pay back as promised!
But there was one personal disadvantages. After seeing and experiencing first hand my strategies, sales presentation and techniques, rumors spread among the staffs.
"Don't ever believe Koh kind, easy going and understanding front appearance. But in actual, he is cunning like a fox. Eat you also you will not be aware, while you keep thanking him."
Haiz... A person got to do what he got to do.
And such, we defeated this second level boss!