3 Ways of Negotiating the Contract with your Cosmetic Packaging Supplier

Seasoned communication skills and well planned research are necessary when a buyer is negotiating with a cosmetic packaging supplier. Not only is it essential to make a professional presentation, listening to the vendor's needs is equally as important. Here are three main ways to approach negotiating an agreement with a cosmetic packaging supplier.

#1 Take It or Leave It Offer Approach

Develop a firm list of demands must be met in order for a contract to be signed. This research involves seeking the best value proposition after examining the needs of the technical, legal and operational departments within the buyer's organization. The process involves identifying and evaluation the most appropriate suppliers, followed by a formal solicitation to meet and negotiate a deal. The supplier responds with a contract bid that specifies:

contract terms
price
lead time
quality
other considerations

By being equipped with multiple quotes from other suppliers, it's possible to reach a more fair agreement than just discussing the supplier's expenses. Presenting at least three other prices and making it clear that the best price will win the business can be an effective strategy. This concept narrows the timeframe on decision-making and puts the ball in the buyer's court. When suppliers are going through difficult financial times and they are not meeting monthly overhead costs, many times it's a buyer's market.

Never fear walking away from a deal if it's not a perfect fit. The vendor may be desperate for business and may be willing to make concessions.

Keep in mind, however, that the hardball take it or leave it approach should be treated as a last resort.
It's usually better to build bridges than burn them.

#2 Competitive Tendering

When initially selecting suppliers, let them know that other candidates are being considered. New bidders may enter the equation with competitive prices and streamlined approaches that become a part of the discussion. Supplier qualification screening help the buyer establish the upper hand and weed out those who are cannot meet production deadlines. Here are criteria that can be used for screening:

reference checks with customers
financial status reviews
supplier's capacity to increase delivery amounts on short notice
quality of service
ability to meet specifications and industry regulations

Be aware that competitive tendering is difficult when trying to compare established proven suppliers with new alternative sources. The advantages of established suppliers are i.a.:

grown relationship and trust
"you know what you get" - known quality and behavioural patterns, e.g. with respect to delivering in time
the supplier knows you, your needs and specific requirements
no ramp up costs

#3 Mutual Benefit

Going for a win-win B2B relationship is perhaps the most powerful way to carve out a long term deal that suits both parties. One of the best ways to get the attention of the supplier is to create new value for them that they don't anticipate, resulting in a surprise. New value for the cosmetic packaging vendor could be created e.g., with an offer to promote them at trade shows or through other marketing channels. This approach will remind the supplier that only a win-win relationship is possible to move forward, especially with a commitment to pay on time.

When the supplier refuses to compromise on price, shift the emphasis on other parts of the agreement. Down payments and warranty time frames are areas that might bridge the gap so that both sides benefit. At some point in the conversation it's helpful to reference the supplier's customers to create an atmosphere of concern for their business model and profit goals.

Another way to increase value for the supplier is to minimize risks. Research what other buyers offer in the cosmetic packaging industry and commit to the supplier's most desirable terms. Suppliers are attracted to multiyear contracts with minimal strings attached. They also favor as much consistent work as possible at the highest rate of profit margins.

Supplier Negotiating Tips

be attentive and responsive in communication style
find out beforehand actual material costs
understand as much industry jargon as possible
be prepared to discuss partnership terms that work for the supplier
formulate a ballpark price in mind, but be willing to compromise
have a reasonable desposit readily available

Conclusion

It's vital to do research on costs before entering negotiations with a cosmetic packaging supplier. Knowing what items cost to make will reveal how much wiggle room is available in the negotiation process. Ultimately, make it clear that a long term relationship will benefit both parties. The reason suppliers crave durable partnerships is because it makes projections more predictable and it's easier for them to manage than to continuously hunt for new clients.