5 Steps to Gain Supplier Agreement to Cost Transparency
Some buyers just have a knack for getting suppliers to do what they want them to do, especially when it comes to providing cost transparency. Suppliers agree to provide buyers cost breakdowns, back-up data and even access to financial information.
What do those buyers do to get the suppliers’ agreement to cost transparency? We find that buyers who are successful:
- Have a clear purpose for the use of the suppliers’ information: what is required, why it is required and how it will be used.
- Take time to consider the benefits and risks to the suppliers if they provide or do not provide the information. Most importantly; what is the risk to the suppliers when not providing the information and what are the potential benefits of participation?
- Inform the suppliers in advance that the request for cost transparency is coming. This gives the suppliers time to discuss the request internally to make informed decisions and gives the buyer time to continue the discussion. It also provides the buyer with a clear view of which suppliers are open to the request and which are not.
- Ask questions and listen. When suppliers express concerns the buyer does not counter. Instead, they follow the first rule in negotiations: shut-up, listen and then ask questions. This enables them to identify suppliers’ concerns, to understand their points of view and incorporate valid input. It also prepares the suppliers to listen to the buyer.
- Understand that “No” is a reasonable answer. After listening to the suppliers’ concerns, the buyer can provide detail on the purpose of the request and the risk and benefits to the supplier for participation (steps 1 and 2 above).
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Here are some of the best buyer lines we have heard in step #5:
- “Of course, it is your decision on whether or not to participate.”
- “The transparency will enable us to source to fewer suppliers so we do not need everyone’s participation.”
- “As you know, we began talking about this program a few weeks ago. There are already a number of suppliers who have signed up.”
Do these steps work? Here is what a recent training participant told us:
- “I listened to him for 30-40 minutes, asked some leading questions, then explained to him why we are going through a process for more cost transparency with our key suppliers. I told him that several other companies are participating, and it’s his decision if he wants to. The supplier asked if he was going to lose business if he didn’t cooperate. I told him that’s information that will likely be part of the decision process.
- The guy immediately agreed to move forward.”