In order to receive the price and quality of service that you want from a supplier, it is vital to negotiate. This can prove troublesome for some business owners – after all, not everyone is a born negotiator. That’s why we’ve put together the following tips on about negotiating with your suppliers overseas.
Maintain good communication
While meeting face to face promises the best communication, it’s usually not possible for new or small business owners – often we must make do with emails and phone calls. Therefore, it is important that you keep your messages clear and polite. Developing a good relationship with your supplier is the key for any negotiation.
Demonstrate that you are “in it” for the long-term
Make your supplier feel that you are a golden customer, and not a one-time purchase. Certainly, the recurrence of your orders will depend on different factors like price and reliability, but show them that you have a genuine interest in doing long-term business. Provide a historic overview of your procurement for the type of product you need to source from them, and also share your purchasing forecasts. Numbers are key for every supplier.
Be aware of cultural barriers
For any supplier that is not in your same country, you have to be aware that there will be cultural differences and barriers. Try to learn about their business culture, and also their jargon. Local sayings and slang terms will probably not be understood, and even worse, will be misinterpreted – avoid slipping your own slang and colloquialisms into your communication. Recognizing cultural differences and understanding how your supplier likes to be treated can win you a lot of benefits.
Pay your invoices early in exchange of discounts
Who doesn’t like to be paid ahead of time? Everyone likes it, but it rarely happens. If you make a good plan to pay your supplier earlier than the due date, he will appreciate it enormously. It may even turn out that your supplier will offer you a discount in exchange for early payment.
Negotiate the percentage of the down payment
Search for the benefits you could obtain by paying a higher down payment than the one requested by your supplier. A higher down payment increases the supplier’s cash flow, and for this they may give you discounts or additional credit terms, they may complete your order in less time, or they may cover some shipping costs.
Request quotes including different Incoterms
Ask them to prepare 2 or 3 different quotes with different Incoterms for your purchase: EXW -Exworks, FOB – Freight on Board, and DDU – Delivered with duties unpaid. Get shipping rates on your own, and compare the difference in shipping costs applied on each Incoterm proposal. If your all-in shipping rates are the best, the EXW Incoterm is the one for you. If your supplier has better rates at origin, and your rates are better for ocean freight, agree on FOB. If the supplier has the best all-in shipping rates, go for DDU.
Let them know you are shopping around
You should not let your supplier think that he is the only one who can save you, even if that is the case. Tell them that it is your normal practice to request quotes from three different suppliers, and your decision will be made on price and perhaps other terms. Competition is the key to trigger lower prices and value added services.
Pay your bills on time
As mentioned previously, it is lovely to be paid ahead of time. But even if payment is “just in time,” it is also good. Every company works with a budget based on expected payment dates. If you repeatedly pay late you are already creating some chaos for your supplier, and it does not make you look like a good customer. Paying on time makes your supplier happy, and it keeps your relationship in good standing.
Get legal advice for contracts
Simple contracts can be agreed on very quickly, most of the time. However, complex contracts (ones with specific items for disclaimers, returns, risks, insurance, and others) will need to be looked at carefully. Therefore it is best to get legal advice. A lawyer will help you focus on the details that are risky in a business agreement. Furthermore, legal advice is also important on international terms, where it can be difficult to proceed legally since different countries have different laws. If your supplier in Taiwan fails you, you cannot sue them with US laws, because – simply – it’s not the same law. Make sure your legal advisor looks into the international law to make sure you have a contract that protects you.
For more tips on negotiation, check out this article also on our blog!