NEGOTIATIONS
According to Mike, to be a great purchaser, you must be a great negotiator. Mike explains that a purchasing agent is measured on price variance. In other words this is the difference in what the cost was and what the cost is now with savings. He has goal to save at least 10 percent annually. An example at Swisher system is the cost negotiated from the printer of its catalogs. In 2004 it cost $186 for each catalog. currently the cost is $1.38 and the quality has dramatically increased. this was a savings of $ 10,000 a year Another example of negotiation that many buyers are not aware of is with United Parcel Service. Some inexperienced buyers think it is a set price however, if large volume is done, the cost can be negotiated. Swisher Systems uses UPS inbound and outbound; therefore, it was able to negotiate better prices.
The most important characteristics Mike emphasized whith negotiating with suppliers are honesty and integrity. This comes along with the quality of comesnication. Not only is it important for the supplier to communicate honestly, but it is also important that the purchaser is honest too. This allows both sides to know exactly what is expected and trust can be gained. In addition, Mike says it is necessary to become an expert on what you buy. The more you know, the easier you can negotiate.
Another scenario where Mike used negotiation had to do with heating cable. When he first arrived at Swisher Systems, the current supplier was charging $10 per foot. He first began reducing cost by using a volume discount. Then he began researching and found another reliable supplier that was less expensive. He used this information to negotiate an even more favorable price with the current supplier. the result was a huge cost saving still keeping the reliability of the current supplier