Negotiating with a sole source supplier can be one of the most disadvantaged negotiation situations for a procurement professional. It's important to know how to prevent sole source situations from occurring.
Sole source situations can occur when an engineer or end user writes a new specification that calls for the use of goods or services from a specific supplier. Once the specified item is launched, the specification and suppliers can be very difficult to change.
It's important to communicate to end users who write specifications that if they are very narrow, procurement will have a difficult time driving value for the end-product. Procurement shouldn't concede to easily to end users, but should instead explore options with these folks to try to find as many satisfactory options as is possible.
If procurement doesn't get much support in this process, they will need to run a parallel process and seek quotes for similar items which can then be presented to the end users for consideration. This approach should be used sparingly. The goal should be for procurement to earn membership on the design team so that early involvement in design becomes the norm. It's much easier to influence change in the early stages, rather than to have to go back and change things once the decisions have been made. Once procurement has established a track record of providing value to the design team, there will be less resistance to their involvement.
Adapted from: Sole Source Situations: Eradicate Them!, http://bit.ly/bmBeCf
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