So, in Part 1, I talked about making some large purchases from some suppliers that were having a hard time giving deep discounts on a product that wasn’t moving well. (Please read it first if you haven’t for context.) As I said in that post there were two things I was negotiating, unit price and shipping price, thus Part 2.
I was doing really well with both negotiations. Until I talked with this one supplier who agreed to discount the price, but not the shipping. In fact, he is who the phrase “I’m just not doing that” came from. I explained that if he discounted the shipping, I would buy more. He shook his head and said, “nope, nope, I’m not doing it!”
When I asked why, he told me that he took a look at it last year and saw that they were losing money. Now, please understand, if I’m able to get all of the other suppliers to discount their shipping deeply, it’s because they have such huge margins on the product price. Thus the phrase “losing money” is extremely relative. If I bought your stuff at cost of goods, then yeah, I’m with you. But that’s not even close to what was happening.
I continued to remind him that if he would reconsider, I would give him more of the little green things that end up in his paycheck. He still didn’t get it. So, I didn’t spend as much money with him. With that said, we had the same situation with our Publishing department a few years ago. They did a special and gave free shipping on every purchase.
That sent sales through the roof! Literally, we had to patch the roof later. So in the month of the sale, revenues were incredible. The trip up came the next month when the shipping bill hit. That caused some of the folks in the department to panic and say that the sale was a disaster since the shipping bill was four times higher than normal.
But the leader was fast on his feet to point out that the expense was not a fixed expense, it was a variable. As a sale was made, the expense was made. When you compare the margin of net profit to total expense, they still won. In other words, DO IT AGAIN!
It takes someone not being so focused on the individual problem for them to see the bigger picture. This applies in basically any problem you have. Try and get outside of it and look at all of the puzzle pieces. When you do, you can find a better way of putting it together.
Have you ever dealt with this type of situation? Share it with me.