By Soheila Lunney
Frequently, I get asked this question: “How do you negotiate with Single/Sole source suppliers?”
The answer to this question requires differentiating between these two types of suppliers and providing a definition for each:
In the case of Single source, since there are choices and multiple organizations have the capability to provide the desired product or service, the buying organization has the opportunity to use the principles of strategic sourcing process, bid competitively, negotiate, and select the supplier that offers best overall value or Total Cost of Ownership (TCO) for the organization.
Sole source situations, however, are more complicated to deal with and negotiate. So, how do you increase your negotiation power when dealing with Sole source suppliers? To build a more powerful negotiation position, buyers need to:
Often, Sole source situations are the result of internal stakeholders (e.g. engineers or chemists) specify special or new requirements (specifications) for a product or service from a specific supplier. Once this occurs, it will become very difficult for the procurement department, which was excluded from the process of developing specifications, to make the change. As a result, preventing sole source situations from happening in the first place, require raising awareness, coordination, and cooperation among various functions within an organization.
Does your procurement organization take the proactive approach in educating your stakeholders (upper level management to technical staff) about the consequences of not including procurement in the early stages of product development and specification preparation?
Dr. Soheila R. Lunney, is the President of Lunney Advisory Group LLC, and co-author of the book “The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals.” She has over 25 years of supply management, procurement, and business experience, involving both domestic and international (Far East, Europe and Russia) activities. She has extensive experience in consulting, coaching and training in supply management, procurement, reengineering the supply management process, the management of procurement function, sourcing of materials and services, reducing total cost of ownership, and negotiation of complex contracts.
Prior to founding Lunney Advisory Group in 2007, Dr. Lunney joined Education Management Corporation (EDMC) as the Vice President of Procurement in January of 2004. Prior to joining EDMC, she was the Director/Deputy to the Chief Procurement Officer at Bayer Corporation. During her 17 years of service at Bayer, she held several positions with increasing responsibilities in Research and Development, Logistics, Customer Services, Materials Management, and Procurement.
Dr. Lunney obtained her Bachelor's Degree in Science from National University of Iran followed by M.S. and Ph.D. from University of East Anglia in Norwich, England.
Dr. Lunney served as a member of the Board of Directors of Pittsburgh Institute for Supply Chain Management (ISM) from 2005 through 2011 and also on the Board of Directors of EDMC Foundation and Pittsburgh Regional Minority Purchasing Council. In addition, since 1999, she has been a member of the Advisory Board of Supply Chain Management at Duquesne University in Pittsburgh where she taught a course in Procurement/Supply Chain Management in the evenings. Dr.. Lunney is a frequent speaker on different Supply Chain Management topics at professional organizations such as ISM (different affiliates), Lawson annual CUE Conference, Puridiom Conference, SPI annual Conference and is a sole holder of a U.S. Patent relevant to Polyurethane Technology and author of several publications.
Contact Dr. Lunney by email at soheila@lunneyadvisorygroup.com
George E. Krauter
In the world of MRO operations, even with multiple attempts to change, improve, increase reliability, the status quo in most plants seems to prevail. Read More
Jaime Leonard
Procurement organizations need to call on their suppliers to increase IT security to mitigate risks against cyber threats. Working with suppliers that take IT security into heavy consideration will be critical Read More
Dennis Bouley
The recent growth of Internet connected industrial and personal devices has been referred to as the “Internet of Things” (IOT) revolution. In fact, this trend is really an evolution that has been underway for Read More
Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More
It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More
Lunney Advisory Group was founded in 2007. Our firm is not your typical consulting company. Some members of our firm are highly qualified and experienced industry executives/practitioners while others are full time or adjunct university professors.… Read More
Guest Contributor
Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More
Guest Contributor
At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More
Guest Contributor
Procurement & finance are two business functions which are often at loggerheads with each other. One reason for this is the lack of perception alignment on an important metric of procurement and finance performance - 'savings'. Read More