Negotiating with Bullies

It makes no sense to waste your time and valuable resources on unprofitable and unreasonable customers.

By ·

I am in Singapore this week, teaching a Strategic Negotiations Workshop for the Asian Supply Chain (3PL) division of a global transportation company.  The class of about 20 Supply Chain Managers came from across Asia (Singapore, Malaysia, Japan, China, and Korea) to attend.  It was truly an honor to work with these very talented and extremely smart people.

But their frustration with Supply Chain and Logistics customers was palpable.  They told me story after story of negotiations that broke down because their customers were solely focused on reducing prices, including squeezing the last fractions of pennies out of 3PL services.  Customers have become bullies they said. Most of their customers are represented by buyers from headquarters assigned to the contracts; professional buyers with little or no understanding of Supply Chain strategies.  Very often these buyers have only one thing in mind: reducing prices and they won’t tolerate discussions about anything else.  They don’t see the bigger picture and don’t understand the value-added components of 3PL services.

My students were desperate for strategies and tactics to help them out of these “price reduction only” discussions with their customers and broaden the conversations.  We worked hard to develop some effective strategies for negotiating with buyers and bullies who focus on price only.  These include:

1. Every time a customer asks for another price reduction, suggest trading for something in return. Ask for something of value back such as move volume, another division, another project.  Never concede, always trade.
2. Keep opening the conversation and adding value to the deal by suggesting additional services or things that cost you little, but represent big value to your customer. 
3. Focus on some new goal that you both want in the future and trade your research for their additional business.  RFID is a good example where research and costs can be shared.
4. If the buyer still refuses to budge on getting price reductions, and you are in a stalemate, try escalating the conversation to a C-level executive.  Try organizing a meeting between your executive and your customer’s executive.  Sometimes executives can break the log jam.

Ultimately, if nothing works, you may have to make a difficult decision and part ways with the customer.  It makes no sense to waste your time and valuable resources on unprofitable and unreasonable customers. 

There is a lesson here too, for buyers of 3PL services.  Third Party Logistics is a relatively low-margin business.  When negotiating with your 3PL, remember that they also need to make a profit margin to stay in business.  In negotiations, stubbornness and demanding price concessions with no justification will make you appear uncooperative and a company the 3PL would rather walk away from.


About the Author

Rosemary Coates
Ms. Coates is the Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of: 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith - How to Avoid and Defend Supply Chain Disputes. Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about Reshoring.

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
2017 Top 50 3PLs: Investment and Consolidation Maintain Traction
The trend set over the past few years for mergers and acquisitions has hardly subsided, and a fresh injection of equity investment is transforming the marketplace. At the same time, shippers may expect to see 3PLs continue to purchase high-tech “solutions” and hire young professionals for implementation.
Download Today!
From the August 2017 Logistics Management Magazine Issue
Which carriers, third-party logistics providers, and North American ports have crossed the service excellence finish line ahead of their competitors? Our readers have cast their votes, and now it’s time to introduce this year’s winners of the coveted Quest for Quality Awards.
BMW Takes the Inland Road to Efficiency
Global Logistics: No Shortcuts to Security
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...
2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...

LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...