11 Tips for Effective Negotiations With Suppliers

Reducing supply expenses takes costs out of the system permanently and reroutes dollars directly to your ambulatory surgery center's bottom line. For most purchases, it is more cost effective to rely on your GPO contract, which may cover as much as 80 percent of your routine supply and services needs. For some purchases, however, it may be worth your while to take a more aggressive approach.

Here are 11 tips for improving supply chain negotiations.

1. Focus your efforts. Unless you're part of a very large organization with dedicated, experienced team of materials professionals, you probably don't have the resources to negotiate most of the purchases you make. Focus your energy on the purchases that will make the most difference.

2. Know the product you're attempting to buy. It is important to understand the capabilities of the product and the market dynamics for that product category. How many close substitutes are there? How does the product perform in circumstances similar to how you intend to use it? Gather as much competitive pricing information on supplies from as many sources as you can.

3. Leverage available expertise. If your ASC is aligned with an acute-care delivery system, leverage the parent organization's supply chain expertise and buying power to realize substantial savings.

4. Align your overall purchasing plan with your business plan. Major purchases must be aligned with your organizational strategy and business plan

5. Understand your financing options. These can make a major impact on the overall cost of the final product.

6. Use a request for proposal from the main suppliers under consideration. This is an effective way to establish an "apples to apples" basis for comparing similar products and pricing, and establishing terms on which to negotiate. Introduce requirements and expectations as early as possible in discussions with suppliers and make sure they are all listed and fully understood by both parties before negotiating specific terms.

7. Create mutual value. Since a contract creates a long-term business relationship between your ASC and the supplier, the final terms must be reasonable for both parties in light of the responsibilities and risks involved.

8. Prepare for ongoing negotiation. Even though the contract is signed, negotiation with the supplier will continue throughout the length of the contract.

9. Include ancillary products and services which will impact your use of the product, including delivery, installation, training, maintenance, etc.

10. Leverage your GPO relationship to get the best possible deal. You can often start with the available GPO price and terms as a way to capture more value.

11. Focus on process, not people. Negotiations are most successful when they focus on interest, not positions. The parties involved invent options for mutual gain. Objective criteria are used for evaluating options. People are separated from the problem — that is, the negotiations are not allowed to become personal.