Introduction:
Renegotiating contracts cuts procurement expenses and saves a lot. A well-planned renegotiation, often called a “quick win,” can provide significant rewards. Organisations may improve negotiating results by using data and analysing it. This paper provides six crucial renegotiation techniques and considerations to maximise your chances of success.
You can lower your buying prices in a number of ways. One business tool, sometimes called a “quick win,” is to renegotiate your current contracts.
Better contract terms can lead to big savings during a review. Still, if you want to improve your chances of success, you need to follow an organised and organised plan. Read our six tips for a good renegotiation process to learn more.
When you use bargaining as a strategy tool, you should also think about the questions below:
- Which companies have contracts that need to be renegotiated?
- What information should you use in a meeting to renegotiate?
- What do you think will happen?
Renegotiation based on facts get the best results.
For one of our clients, we were going to put in place a full programme to improve speed and effectiveness. Procurement was going to be a big part of this programme.
Which suppliers should you do renegotiation with?
Renegotiation was one of the main ways that costs were cut and money was saved in the first part of the buying project.
Our spend control system was used to get a full picture of how the money was spent. The company worked with almost 2,000 providers over the last year. Even though the money was spread out among several groups and providers, we quickly found a number of possible renegotiation options by using a built-in, automatic potential analysis.
You need useful information, like how much you spend growing, how important you are as a customer, or when your contracts are ending, to figure out which sellers or contracts you should try to renegotiate. You might also want to look at how much money is spent across departments, business units, or groups to see if there are chances to bundle costs.
We ended up choosing 20 or more providers (or contracts) for a bargaining process in this project after adding qualitative data to the analyses.
What Information Should You Bring to a Renegotiation Meeting?
For a bargaining meeting to go well, everyone needs to be well-prepared. Before a meeting, you should always do a full analysis of the present situation to help you understand it better. We suggest that you use a mix of internal and external analyses for this.
We put together a number of useful analyses for the customer in question, including spend growth and source financials. All of these insights were made immediately by the spend management system and then sent straight to Powerpoint before the meeting.
You should show off the most important information in a bargaining meeting, from both a business and a military point of view. For instance, if you’ve bought a lot more and spent a lot more in the last few years, you would expect better terms or unit prices to represent this. If this isn’t the case, you should tell the provider what you found and ask them to give you more information or answers. Note that if the sellers can’t answer all of your questions during the meeting, you should give them “homework” or follow-up tasks to do after the meeting.
What do you think will happen?
Through better price terms, this project cut the procurement costs per seller (i.e. addressed spend) by an average of 6% that saved millions of dollars. Keep in mind that the amount of money saved and costs lowered were different for each deal, provider, and type of spending. For example, after the renegotiation process was over, one provider dropped its prices by an average of 20%.
These results show that renegotiation can help your business save a lot of money when it comes to buying things. Also, the process doesn’t take long as long as you have the right information and make sure you follow up in the right way.
Conclusion:
Renegotiation is a key procurement cost management method that may save money easily. By selecting the best suppliers, conducting thorough assessments, and setting clear expectations, organisations may cut procurement expenses. Such successful projects demonstrate the importance of a well-organized renegotiation approach, enabling firms to achieve favourable terms and produce long-term value through strategic procurement.
