Aggressive negotiations, aiming for significant reductions in the purchase of critical resources, can be dangerous, especially in contexts of supplier capacity constraints or supply chain interruptions. Traditionally, negotiation is seen as an effective tool for reducing acquisition costs and increasing profits. However, when this approach is applied without considering the nuances of the market and business relationships, it can result in adverse consequences.
Aggressively negotiating supply prices can result in a situation where the company's orders are not prioritized in a context of constrained supplier capacity, leaving it without essential products to maintain its operations. Suppliers often choose to prioritize customers who offer higher profit margins or who maintain stronger business relationships, leaving those who only seek lower prices at a disadvantage.
Let us recall the example of a large retail chain that had negotiated aggressively with a television supplier in order to obtain extremely low prices for Black Friday. However, due to high demand, the supplier's production capacity was overloaded and, as a result, the supplier prioritized orders from other retail chains and customers who had made a “worst negotiation”, leaving the company's orders in the background. This ended up severely impacting the company's sales during Black Friday that year.
Another common example of this type of “trap” in operations occurs in freight contracts. In a highly competitive transport market, shipping companies seek to negotiate excellent freight rates to reduce their logistics costs. However, when demand for transportation increases in the last few weeks of the month, or during seasonal peaks, these shippers end up with no vehicles available to meet their needs, having to resort to more expensive freight to move their products.
Therefore, it is crucial that companies adopt a more balanced and strategic approach when negotiating with suppliers. Instead of focusing exclusively on reducing prices, they should consider suppliers' capabilities, risks and limitations, collaborating with them to find mutually beneficial solutions. This may involve establishing stronger partnerships, developing more effective inventory management strategies or even investing in diversifying the supplier base.
Leonardo Julianelli
https://ilos.com.brExecutive Partner of ILOS. Graduated in Production Engineering from EE/UFRJ, Master in Business Administration from COPPEAD/UFRJ with extension at EM Lyon, France, and PhD in Production Engineering from COPPE/UFRJ. He has several articles published in periodicals and specialized magazines, being one of the authors of the book: “Sales Forecast: Organizational Processes & Qualitative and Quantitative Methods”. His research areas are: Demand Planning, Customer Service in the Logistics Process and Operations Planning. He worked for 8 years at CEL-COPPEAD / UFRJ, helping to organize the Logistics Teaching area. In consultancy, he carried out several projects in the logistics area, such as Diagnosis and Master Plan, Sales Forecast, Inventory Management, Demand Planning and Training Plan in companies such as Abbott, Braskem, Nitriflex, Petrobras, Promon IP, Vale, Natura, Jequití, among others. As a professor, he taught classes at companies such as Coca-Cola, Souza Cruz, ThyssenKrupp, Votorantim, Carrefour, Petrobras, Vale, Via Varejo, Furukawa, Monsanto, Natura, Ambev, BR Distribuidora, ABM, International Paper, Pepsico, Boehringer, Metrô Rio , Novelis, Sony, GVT, SBF, Silimed, Bettanin, Caramuru, CSN, Libra, Schlumberger, Schneider, FCA, Boticário, Usiminas, Bayer, ESG, Kimberly Clark and Transpetro, among others.
