HOW TO FIGHT A PRICE INCREASE

Randy Christoffersen

Vice President of Procurement (In transition)

rjchristoffersen@gmail.com

AGENDA “Wisdom” from Randy Suggestions for Success Techniques

Initial Defense Stage Justification Stage Closure Stage

Wrap-Up and Q&A Mini-Case Study

“WISDOM” from Randy

AIM AT NOTHING AND YOU’LL HIT IT!

IF YOU ALWAYS DO WHAT YOU ALWAYS DID, YOU’LL ALWAYS GET WHAT YOU ALWAYS GOT

CONTINUOUS IMPROVEMENT BEATS POSTPONED PERFECTION

BE CAREFUL WHEN YOU TALK “WIN-WIN”

SUGGESTIONS FOR SUCCESS Every situation is unique.

Always review all your options and techniques before responding.

Try to listen more than you talk.

Effective preparation is the most important thing for successful results.

Pick multiple options in case your preferred options do not work out.

Creativity in developing your options is important.

“Rehearsing” with a colleague or manager is recommended.

Always look for your “advocate” on the other side. (Often the account manager).

INITIAL DEFENSE STAGE Say no—take a hard line.

Remind the supplier they are responsible to offset inflation via their own internal improvements.

Review their cost savings history. If they have not made productivity suggestions, challenge them accordingly.

Check with other sites inside your company to see if others are receiving a request. Present a united front.

Confirm all customers are being treated the same

Remind them they must honor all existing contracts.

Ask for documentation Detailed and specific

Cost-based

If commodity driven, make sure ONLY commodity impact is being passed on.

JUSTIFICATION STAGE Request documentation:

Ask for actual invoice copies

Review industry material indexes to validate request (if appropriate)

Explore joint investment in capital or tooling.

Review volumes. Challenge for a decrease if volumes have increased.

Construct a rough TCO model to better understand the supplier’s cost.

Test their competitive position. Re-quote.

Remind them of your 60 day notice implementation policy.

Elevate as helpful.

Offer lean resources to offset increase.

CLOSURE STAGE Delay effective date until you can pass through to customers.

Meet with the supplier’s supplier (as appropriate)

Offer long term agreement for more business for a reduced increase.

Seek substitute materials or alternative sub-suppliers.

Offer temporary relief with an agreed plan to roll-back later.

Reluctantly agree, but expect a formal plan to offset. Schedule a cost reduction brainstorming session.

Ask for raw material baseline and put formal 2-way agreement in place.

Ask for improved payment terms.

WRAP-UP and Q & A

CASE STUDY

At your table, review the attached letter. Discuss how you would approach attacking this increase

request. Identify 3-4 techniques you would use and why. Be prepared to report out to the full group (time-

permitting).

INITIAL DEFENSE STAGE Say no—take a hard line. Remind the supplier they are

responsible to offset inflation via their own internal improvements.

Review their cost savings history. If they have not made productivity suggestions, challenge them accordingly.

Check with other sites inside your company to see if others are receiving a request. Present a united front.

Confirm all customers are being treated the same

Remind them they must honor all existing contracts.

Ask for documentation Detailed & specific Cost-based

If commodity driven, make sure ONLY commodity impact is being passed on.

JUSTIFICATION STAGE Request documentation.

Ask for actual invoice copies

Review industry material indexes to validate request (if appropriate)

Explore joint investment in capital or tooling.

Review volumes. Challenge for a decrease if volumes have increased.

Construct a rough TCO model to better understand the supplier’s cost.

Test their competitive position. Re-quote.

Remind them of your 60 day notice implementation policy.

Elevate as helpful. Offer lean resources to offset

increase.

CLOSURE STAGE Delay effective date until you

can pass through to your customers.

Meet with the supplier’s supplier (as appropriate)

Offer long term agreement for more business for a reduced increase.

Seek substitute materials or alternative sub-suppliers.

Offer temporary relief with an agreed plan to roll-back later.

Reluctantly agree, but expect a formal plan to offset.

Schedule a cost reduction brainstorming session.

Ask for raw material baseline and put formal 2-way agreement in place.

Ask for improved payment terms.

PRICE INCREASE DEFENSE CHECKLIST