Tag Archives: discount

“Your Procurement Project Has No Budget. Prove You Need One.” Too Harsh Or Just Right?

Been asked to justify every single expense for your procurement project? Here’s how to implement a strategy that works to do this.


Picture this (and maybe you don’t need to because it has already happened): you’re successfully managing a procurement project – one which you consider to be critical to the organisation – then the unthinkable happens: The CPO approaches you and says “Times are tough and we’re cutting costs. As of today you have no budget. Prove to me why you need one.” 

It sounds extremely harsh; not to mention unrealistic! But is it? Reevaluating everything from the group up is one of the big supply chain and procurement ideas we think will change everything in 2021. But how do you successfully adopt such an approach, and what benefits can it bring? 

What are the benefits of working from the idea of a ‘zero budget?’ 

It’s a well-established fact that most of us in procurement are trying to save our companies’ money right now, but we’ve all equally acknowledged that simply asking our suppliers for a blanket discount is not only inappropriate, but just won’t deliver the savings we need. So what should we do instead? 

One effective cost control method is to imagine you simply don’t have a budget for the procurement project you want to undertake. To start this process, you meticulously analyse every single line item in your project, and attempt to justify its existence. This strategy, which is effectively the opposite of relying on historical purchasing patterns, enables you to rethink and justify everything you’re doing – and hopefully figure out how to control costs more effectively in the interim. 

This approach, which does require a considerable amount of time and effort, has in years gone by been dubbed ‘too harsh.’ But how about during years like the one we’ve just had? It may well be realistic, appropriate and, most of all, needed. 

How do you restart the planning process for your project with no budget?

If the idea of justifying every single line item cost in your procurement project sounds like a lot of work, it’s because it is. But it certainly isn’t no pain for no gain, as the level of analysis required enables you to innovate and cut costs in ways you never would have imagined. 

In order to implement a such a strategy, experts recommend the following: 

  1. Get into the mindset of ‘you have no budget. Prove to me you need one’: As harsh as this sounds, this is the exact mindset you will need in order to truly justify every single expense. 
  2. Get management’s buy-in: The analysis required to implement such an approach will likely take time (it may take weeks or even months), so buy-in from the CPO and above is necessary. 
  3. Know that training and dedication will be required: When committing to such an approach, there is no point trying it, and then reverting back when it’s too hard. It’s an all-or-nothing approach and you need to see it to the end for it to be effective. 

In addition to the above, there is one essential question you need to ask yourself when implementing this strategy, and it might be a truly uncomfortable one. Discover what it is, and many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.

How To Ask Suppliers For Discounts The Right Way

Before you even think of demanding a discount from your suppliers, try these avenues first – they’re far less treacherous routes


An essential part of procurement’s job, and something that will always be required of procurement, is to negotiate the best supplier deals for the business. And as much as we talk about strategic procurement (and this is really important), procurement’s success will always be measured by cost savings. Those savings are not the only way our success is measured, of course, but they are one of our raison d’etres.

So we know we need to save money for the business, but what is far from settled is how. Is a demand letter appropriate, especially in this year’s challenging business environment? Or should we use a more relationship-based approach? We’ve tackled the topic from a number of angles this year, so here is the very best advice from industry influencers and experts.  

What not to do

While the exact mechanisms of what to do when asking for supplier discounts is up for debate, there is certainly some consensus on what not  to do. When a post from Procurious Founder Tania Seary asking whether it was ok to send your supplier a demand letter asking for a discount went viral earlier this year, the procurement community seemed to be united on the fact that this wasn’t ok. 

In a nutshell, many people thought that this approach was a little arrogant, and that it gave the impression that you were a ‘big brand, doing it just because you can.’ And while this approach may have been acceptable 20 or 30 years ago, now it most certainly is not. 

More than that, though, many people didn’t like the idea of generic demand letters simply because they didn’t work. Discounts depended on good relationships, and demand letters did not cultivate those, as one procurement professional noted: 

“Customers depend on suppliers and vice-versa. It’s a big ecosystem, and [we all need to remember that] if you squeeze out small suppliers and competition lessens, costs will inevitably increase.” 

Keen to hear what everyone else said? Here’s the original article. 

Developing strategic supplier relationships

When it comes to asking for discounts, the consensus seemed to be that doing so through establishing strategic supplier relationships was the best way to succeed. But how exactly do you do that?  

Joe Lazzerini, Manager at Corcentric, enlightened us on how we can establish these successful relationships, and there are many more avenues to doing so than you might think. 

According to Joe, many of us take the attitude of ‘if it’s not broke, don’t fix it.’ But when it comes to relationships, we shouldn’t be taking this attitude, but instead always be looking for the opportunity to improve relationships, streamline processes, and change cost models. In a nutshell, we need to challenge the status quo. 

This starts, he believes, with asking your suppliers the simple question of: ‘What can we be doing better?’ 

Beyond this, we should aim to improve on the following with all of our suppliers: 

  • Trust and loyalty (treat your suppliers as much more than just vendors) 
  • Technology and automation 
  • Adherence to payment terms
  • Communication plans
  • Creation of a dedicated Supplier Relationship Manager 
  • Internal alignment between Procurement and Supply Chain category leaders

Continually improving the above will drastically improve our relationships with our suppliers, which will, in turn, enable us to ask for further discounts. 

Potential areas for discounting

If great relationships enable us to ask for a discount, should we then just ask for one? Not quite, says Corcentric’s Joe Lazzerini. In fact, there’s so much more to discounting than simply hammering down the unit price. 

When asking for a discount, Joe recommends that you do as much preparation as possible, including considering how you can make discounting a win-win, and remembering that you need to collaborate, compromise, and at all times work with a partnership in mind. Here are 9 talking points to begin your discussion about cost optimisation: 

  • Contract length 
  • Reduced future cost increases with caps
  • Rebates 
  • Volume thresholds 
  • Delivery costs 
  • Payment terms
  • Ancillary charges 
  • Better reporting, more transparency, communication plans, etc. 

You can read more of Joe’s game-changing advice here. 

Relationships are always the right way 

This year, more than every other year before it, we’ve learnt that relationships, partnerships and people form the basis of success in just about everything we do. Asking for a discount is no different: if you first focus on developing a strong strategic relationship, everything after that will be more successful. 

Is It Fair Game, Or Not OK, To Send Your Supplier A Letter Demanding Cost Cuts?

Is it acceptable – or not – to send your supplier a letter asking for a discount? You would be surprised…


Here at Procurious, we’re always trying to be progressive, challenge the status quo and push for our profession to be more innovative and value-adding. And in good news, we’re starting to see that many in our community feel the same. How do we know? 

In a now-viral post on LinkedIn, our Founder, Tania Seary, posited the question: Is it fair, or not okay, to send your supplier a letter asking for cost cuts? 50,000 views and 60 comments later, we now know this is a hot topic for our community!

It’s something we’ve debated before, but not to this degree. So in times where businesses all over the world are struggling, and there’s more pressure on procurement than ever before to secure discounts and keep organisations moving (or afloat?), is it fair game to demand cost cuts from your suppliers? Here’s a snapshot of what everyone thought … see if you agree. 

‘A stuck in the nineties’ approach

The vast majority of people who commented on our post did agree that this year has been a particularly challenging one for businesses and by association, for procurement. One Senior Procurement Director summed it up when he said: 

‘Procurement leaders need to be looking for cost reductions to support the strained financial positions of their organisations.’ 

Yet should those cost reductions come from a demand letter sent to your supplier? Many people did not think it was okay to send your supplier a letter demanding cost cuts, regardless of the organisation’s circumstances. In the main, procurement professionals thought this approach was akin to a ‘power play’ and was a little arrogant, giving off the attitude that a big organisation is simply ‘a big brand, doing it because they can.’ 

Many procurement professionals recognised that while this tactic may have been appropriate at some other time, it no longer was. In fact, many people made reference to the nineties as a time where this may have been acceptable … but realised that those days were far gone. One person noted: 

‘This practice [the practice of demanding reductions] was used at Volkswagen in the 90s under its famous CPO. Though it showed a lot of success at the time, I believe such a practice belongs to the 90s – a lot has changed since then.’ 

Why doesn’t this approach work? 

Beyond the fact that the practice of sending a letter asking for a discount seemed ‘old-school,’ many professionals noted that for at least a few reasons, this tactic doesn’t actually work. 

The first reason why people thought this wouldn’t work was because essentially, demanding a discount goes against all the good work that procurement usually does in developing meaningful and strategic supplier relationships. Procurement professionals always need to remember that suppliers exist within a delicate business ecosystem, and it’s best to manage this responsibly: 

‘Customers depend on suppliers and vice versa. It’s a big ecosystem, and [we all need to remember that] if you squeeze out small suppliers and competition lessens, costs will inevitably increase.’ 

Beyond this, though, when making demands of suppliers, procurement professionals need to remember their negotiation training, insomuch as: 

‘Blind one-size-fits-all letters are a forced outcome, not a negotiated win-win discussion.’ 

What’s the alternative? 

It seems that within the procurement community, sending letters requesting discounts is absolutely a no-go. But in a time where discounts might, for some companies, be needed more than ever, what is the alternative? 

Being the savvy community that it is, procurement professionals had plenty of better options when it came to negotiating a better price. 

The most popular suggestion was to employ a process to assess cost saving opportunities in partnership with your supplier. This would lead, according to a few different people, to the supplier further negotiating, and then a potential automatic reduction in expenses for both. 

The other option available is to negotiate better terms, a tactic used often, but which should be done through a strategic lens. One person recommended that we all should: 

‘Engage with our suppliers and explain what we need in terms of realistic cost savings and the end goal.’ 

‘You’ve got many tools at your disposal, including SRM and category management, so much so that you need never revert to the dreadful “give me money off or else” letters.’ 

Do you agree? Or would you still send a letter requesting a discount if you needed it? Let us know in the comments below.