Vendor Cost Control Techniques

“We have strong vendor relationships – we’re getting the best pricing.” A common belief in finance & ops teams. But here’s the reality: Vendors don’t always price based on what’s fair – they price based on what you’ll tolerate. And without centralized purchase and pricing data, you’re leaving money on the table. Here’s where most teams get it wrong – and what to do instead: ------ (1) The illusion of “great vendor pricing." Most finance & ops leaders believe they’re getting competitive rates. But when companies centralize spend and analyze vendor pricing, they find: – The same SKU purchased at different prices across locations – Missed discounts that should’ve been applied – Gradual price creep – no one’s watching, so vendors push the limits Loyalty to vendors doesn’t guarantee loyalty back. ------ (2) Fragmented spend kills negotiation power. When every team or department buys separately: – You lose out on volume-based pricing – There’s no consolidated view of vendor performance – Finance can’t see the full picture of what’s being spent – or with whom You might be spending millions on indirect – but if that’s scattered across dozens of uncoordinated purchases, your leverage is gone. ------ (3) “We trust our vendors” is not a strategy. Trust is not a substitute for data. Vendors optimize for their margins – not yours. What happens without visibility: – Long-time vendors gradually increase prices – Companies overpay by 10–15% on indirect spend – Finance finds out too late – when budgets are already stretched It’s not about replacing vendors. It’s about managing the relationship – not being managed by it. ------ (4) The fix: Leverage data, not assumptions. The strongest finance & ops teams: – Centralize all vendor spend into one source of truth – Consolidate purchasing to unlock bulk discounts – Track vendor performance and hold them accountable – Use clean data to drive every negotiation The result: Lower costs. Better terms. Total control. ------ Final thought: Great vendor relationships aren’t built on trust alone. They’re built on leverage. If you’re not tracking what’s being spent – and where – you’re already overpaying. Finance leaders who take control of procurement don’t just cut costs. They build smarter, more scalable businesses.

𝗟𝗲𝘁'𝘀 𝘁𝗮𝗹𝗸 𝗰𝗼𝘀𝘁𝘀 𝘁𝗼𝗱𝗮𝘆... ...because if you're in FP&A, you've definitely sat in one of those meetings… “Guys… we need to cut costs.” Everyone goes silent and all heads swivel to finance. lol. And then you instinctively open Excel to look busy 😩 A while back, a company I worked with decided to launch a "cost reduction sprint." The goal? Shave ₦100M off the P&L in 60 days. The first move? Freeze team lunches, and slash staff welfare. But guess what was untouched? >> A ₦40M/month logistics arrangement that hadn’t been renegotiated in 18 months. >> A bloated software stack with 10+ overlapping tools. Yes, costs came down. But so did morale, productivity, and eventually, revenue. Don't be like that. Let me show you how to approach cost reviews smartly: 1. Start with the big buckets: Don't waste energy arguing over lunch budgets. Zoom out. Where are the real levers? Usually, 3–5 cost lines move the needle: logistics, payroll, marketing, operations. Focus there first. It’s where meaningful efficiency lives. 2. Break down into fixed vs. variable costs and review performance: >> Fixed costs (rent, salaries) require structural decisions: renegotiation, process reengineering, automation, etc. >> Variable costs (shipping, commissions, raw materials) give more flexibility for short-term gains. Plot costs vs. revenue: do they scale appropriately? 3. Do a zero-based review (where needed): Zero-based budgeting isn’t just for budgets. Ask: “If we had to build this cost line from scratch, would we spend this much? Why?”. It's tough work but worthwhile, and especially useful for subscriptions & software, marketing expenses, consulting and third party vendors. 4. Evaluate vendor spend: Vendor lines hide shocking amounts of inefficiency. I once found a team paying 3x market rate for routine services because “we’ve always used them.” Ruthlessly benchmark rates. Consolidate where possible. Kill redundancy. 5. Headcount & Payroll: Headcount is usually the biggest cost but it’s not the first to attack. Before suggesting layoffs: >>Fix team structure >> Eliminate manual tasks >> Automate where possible >> Cross-train before hiring Layoffs are sometimes necessary, but they should never be the default. 6. Introduce procurement & expense discipline: This doesn’t mean burying everyone in red tape. Just ensure spending decisions are intentional. Clear approval flows. Visibility. Pre-approvals for big ticket items. 7. Simulate cost impact scenarios: “What happens if we cut travel by 40%?” “What if we renegotiate rent in 3 locations?” Data wins debates. Always model before recommending. 8. Tie every cost to a business goal. For every cost line, ask: “What outcome are we driving with this?” No clear answer? That’s a red flag. Recommend a reduction or a reallocation. Bottom line: Cutting costs is reactive. Optimizing costs is strategic. The real win in FP&A is helping the business do more with less, without ruining the system. #FPATuesday

Missing inventory, late shipments, double payments; sound familiar? A broken procurement process could be holding your business back. When I first stepped into running procurement in a manufacturing business, they weren't tracking everything in detail. They had basic processes, but to be honest, I couldn't figure out how they actually knew if they had everything they needed to build. For small to mid-sized businesses, especially in manufacturing, building a solid direct procurement process isn’t just a nice-to-have—it’s the foundation for efficiency, cost control, and risk management. Let’s walk through the full lifecycle to ensure you’ve got all the pieces in place: 1️⃣ It All Starts with a Clear Request Do your internal teams have a structured way to request purchases? Whether it’s a simple form or software, requests should capture all the details: quantities, specifications, and deadlines. It cannot be guesswork. 2️⃣ Send Out RFQs and RFPs Before committing to a purchase, send requests for quotes (RFQs) or proposals (RFPs) to vetted suppliers. Get multiple quotes/proposals so you can compare and get the best value. 3️⃣ Approvals and Purchase Orders (POs) Once you’ve selected a supplier, make sure purchase orders are properly approved before they’re issued. Clear approval levels save time and prevent costly mistakes, like unauthorized purchases. 4️⃣ Shipping Releases and Tracking For manufacturing, staying on top of shipping releases is critical. Ensure you’re tracking every shipment; both to keep production lines moving and to avoid paying for items that never arrive. 5️⃣ Receiving Reports and Inventory Management When materials or products arrive, your receiving team should verify them against the purchase order. Are quantities correct? Does everything meet quality standards? 6️⃣ Quality Control and Warranty Returns Checking the incoming shipments is critical. If a defect or issue is identified, warranty return procedures should already be in place to resolve it quickly. 7️⃣ Invoice Matching and Payment Here’s where things can fall apart without strong controls: matching the invoice to the PO and receiving report. This step ensures you’re only paying for what you ordered and received. Automating this process can reduce errors and save time. 8️⃣ Closeout or Adjust POs Finally, once everything is delivered and paid, close out the PO or make adjustments for any discrepancies. A structured process like this might sound like a lot, but it saves time, reduces stress, and ensures your team can focus on what really matters: growing your business. Every step, from the first request to final payment, matters, and having the right systems in place can save you money, improve relationships with suppliers, and keep your operations running smoothly. Ready to review your procurement process or set one up for success? Let’s chat. #Procurement #Manufacturing #ProcessOptimization #VendorManagement #BusinessGrowth

Are your suppliers demanding a price hike? Use these 6 game-changing strategies to take control and turn the tables! Here’s the harsh reality: eventually, suppliers will push for price hikes. How to block, slow, or turn to your advantages requests for price increase: 𝟭. 𝗖𝗼𝗻𝗱𝗶𝘁𝗶𝗼𝗻𝗶𝗻𝗴: Set expectations upfront. → Announce cost reduction plans. Suppliers need to know you’re serious. → Hint at penalties for unjustified increases. Make them think twice. 𝟮. 𝗥𝗲𝗷𝗲𝗰𝘁𝗶𝗼𝗻: Say no confidently. → Standardize rejection procedures. Use formal letters. → Launch RFQs (Request for Quotes). Explore alternative suppliers. 𝟯. 𝗥𝗲𝗳𝘂𝘁𝗮𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗗𝗲𝗹𝗮𝘆: Challenge and stall. → Counter with data. Analyze and present your findings. → Demand detailed justifications. Make them provide solid evidence. 𝟰. 𝗢𝗳𝗳𝘀𝗲𝘁𝘁𝗶𝗻𝗴: Negotiate wins. → If a hike is unavoidable, get something in return. Better terms, added services, future flexibility → (Remember, they are under pressure). 𝟱. 𝗟𝗶𝗺𝗶𝘁𝗶𝗻𝗴: Cap the impact. → Know your contracts. Ensure clauses limit price hike frequency and magnitude. → Set caps and collars. Negotiate maximum and minimum limits on price changes. 𝟲. 𝗙𝘂𝘁𝘂𝗿𝗲-𝗽𝗿𝗼𝗼𝗳: Plan for the rebound. → Accept with conditions. Protect your interests. → Condition to immediate reversals when markets shift favorably. Your mantra: Slow up, fast down. Implement increases slowly, and apply decreases quickly. Ever faced a tough supplier negotiation? Share your strategies below! #negotiationbydesign #negotiation #pricehikes

𝗩𝗲𝗻𝗱𝗼𝗿 𝗖𝗼𝘀𝘁, 𝗤𝘂𝗮𝗹𝗶𝘁𝘆, 𝗮𝗻𝗱 𝗧𝗶𝗺𝗲... 𝗖𝗮𝗻 𝘄𝗲 𝗵𝗮𝘃𝗲 𝗶𝘁 𝗮𝗹𝗹??? Ever heard of the Iron Triangle? (I'll give you a hint, it's not Bermuda's neighbor in the Atlantic Ocean!) Project Managment folks may be familiar with the Iron Triangle concept. Procurement peeps, we can also apply this to vendor contract negotiations. Envision a triangle with each corner representing cost, quality, and time. Changes to one corner usually impacts the others. Having flexibility in one corner, though, can strengthen the others. Use historical data for negotiation planning, making informed choices that balance the triangle based on your business needs. 𝗖𝗼𝗺𝗺𝗼𝗻 𝗻𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗹𝗲𝘃𝗲𝗿𝘀 𝗳𝗼𝗿 𝗜𝗿𝗼𝗻 𝗧𝗿𝗶𝗮𝗻𝗴𝗹𝗲 𝗼𝗽𝘁𝗶𝗺𝗶𝘇𝗮𝘁𝗶𝗼𝗻: ➜ Tiered pricing models for greater flexibility. ➜ SLAs with penalties/ incentives to encourage vendors to exceed performance targets, minimal cost, maximum impact. ➜ Paying early to secure discounts. ➜ Efficiency gain clauses, typically requiring YOY gains for the duration of the contract. ➜ Right to audit clause to ensure compliance w/ minimal cost (if any). ➜ Flexible termination language & transition support. Ensures your pocketbook and operations don't suffer if things go south. 𝗔𝗻𝗱 𝘁𝘄𝗼 𝗯𝗼𝗻𝘂𝘀 𝘁𝗶𝗽𝘀: 1. If you're constantly spinning your wheels with subpar vendor quality, rework costs are likely eating into your expected ROI. Keep a close eye on total cost of ownership, the vendor may be costing you more headache than it's worth. 2. Investing in vendor relationships is key. Strong partnerships foster flexibility and innovation, translating to better quality at reduced costs. Win\ win all around! --------------------- What other strategies do you use to balance cost vs quality? Let me know in the comments! 👇

Want peace in your next annual vendor negotiation (AVN) with #Amazon? 🕊️🤝 Then you need to stabilise your Net PPM between AVN cycles. Here's how: 𝟭- 𝗦𝘁𝗮𝗿𝘁 𝘁𝗿𝗮𝗰𝗸𝗶𝗻𝗴 𝗽𝗿𝗼𝗳𝗶𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗮𝘁 𝗔𝗦𝗜𝗡-𝗹𝗲𝘃𝗲𝗹 Whether you're an SME or a big multinational. You must track your sales and profit metrics at the product level. Without having a clear understanding of how a single item may impact your account profitability, you cannot take effective action. I highly recommend using Amazon's SP-API and connecting it to your internal Power BI. If that sounds too complicated, there are numerous reporting tools available for Amazon vendors that provide the same insight without the initial setup barrier. 𝟮- 𝗥𝗲𝘃𝗶𝘀𝗲 𝘆𝗼𝘂𝗿 𝗽𝗿𝗼𝗺𝗼𝘁𝗶𝗼𝗻𝗮𝗹 𝗳𝘂𝗻𝗱𝗶𝗻𝗴 𝗮𝗹𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻 Once you clearly understand your portfolio's profit performance, it's time to shift investments to margin-accretive SKUs. Amazon will often ask you to run price promotions on existing top sellers. But these may not be your profit drivers. So make sure you use ASIN-level insights to shift investments to where they will benefit your wider account margin. 𝟯- 𝗠𝗼𝗻𝗶𝘁𝗼𝗿 𝘁𝗵𝗲 𝗔𝗦𝗣 𝗳𝗹𝘂𝗰𝘁𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘆𝗼𝘂𝗿 𝗽𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 Using virtual shelf monitoring software like Keepa or Profitero, Stackline, or commerceIQ can help identify ASP fluctuations on your account. This is important because it allows you to spot pricing errors, overstock markdowns, and price-matching activities early. While you won't be able to prevent the ASP changes, tracking them will help you better understand whether Amazon's requests for margin support are justified… or caused by the online retailer itself. 𝟰- 𝗧𝗿𝗮𝗱𝗲 𝗰𝗼𝘀𝘁 𝗱𝗲𝗰𝗿𝗲𝗮𝘀𝗲𝘀 𝗳𝗼𝗿 𝗰𝗼𝘀𝘁 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝘀 Vendor Managers are known to reject vendor requests for cost price increases. But when reviewing your portfolio, you'll likely see two things: 1) ASINs with an accretive Net PPM, and  2) ASINs with a dilutive Net PPM. This allows you to raise cost prices on items that have a margin surplus in exchange for a cost price decrease on dilutive items. Vendor Managers will often accept this trade, as long as the wider account margin remains unchanged. 𝟱- 𝗠𝗶𝗻𝗶𝗺𝗶𝘀𝗲 𝘁𝗵𝗲 𝘂𝘀𝗲 𝗼𝗳 𝗰𝗼𝘀𝘁 𝘀𝘂𝗽𝗽𝗼𝗿𝘁 Amazon is quick to request cost support from suppliers. But any dollar spent outside your AVN forms the basis of the investment requirements for your future negotiation. So instead of granting cost support, focus on initiatives that drive joint cost savings: Bulk order discounts linked to a consolidated FC delivery, sell-out funding in exchange for visibility on the deals & promotions page, etc. Remember: Managing your vendor profitability with Amazon is a joint effort. If you abandon your Net PPM between AVN cycles, annual negotiations will be more difficult. --- Did I miss anything? Let me know in the comments! #amazonvendor #amazonstrategy

The 3-step RFQ process to reduce costs & get the best value Implementing an effective "Request for Quote" (RFQ) process can help you find the best vendors at the right price. Here's how: 1️⃣ Use a "3 bid and a buy" system — Send bid requests to your top 3 vendors for each product or service. Clearly outline your needs, timeline, and evaluation criteria. 2️⃣ Have a quick evaluation process — Know exactly what you're measuring (e.g., price, delivery time) and how you'll decide the winner. Focus on the best overall value, not just the cheapest price. 3️⃣ Assign a dedicated person to manage RFQs — Having an individual running this process repeatedly pays off. They'll build vendor relationships and expertise to streamline the workflow. When buying commodity items, RFQs shine. The key is defining what "value" means for your business. Is it hitting a certain price point? Guaranteed on-time delivery? A combination of factors? Get clear on your priorities. While it takes some upfront work, a well-oiled RFQ process saves you money in the long run. Procurement tools can help automate the process. Or at the very least, create email templates to make outreach fast and easy. Watch this video for a real-world example of how to implement this system: