Price Sharing

One of the things that we deal with all the time in purchasing is exactly what to share between suppliers. Should you share a competitor’s pricing with another company to try and get better pricing for your company? This is more often than not the question at hand, so is this really ethical or in the true nature of fair business practices?

There are a few ways to go about working through situations like this and not skirting the ethical lines. One way is to take the pricing of one company, lower it by 3-5% and then share that pricing to a competitor to see if they can match or beat it; this is one way to get the best pricing for your company and also not share the actual pricing from the original company. The other way is to share the pricing from one company to another and not provide the name of the company or the mark-up structure. If this is done correctly, it is extremely difficult for a company to determine who each other are during the bid process.

Some companies are downright ruthless when it comes to this practice and have no problem sharing another companies pricing, products and mark-up structure to make sure that they get the best price for their company. While this is one way to do business, it does not create a level of trust between the company and their supplier partners and can come back to bite them in the end if the relationship ever sours, which can and does happen. It is really up to your department and your company’s purchasing policy as to which way to go about this. There are arguments to be made on each side, sharing pricing does often lead to the lowest price for the products, but is it ethical and does it lead to the best relationship with your suppliers? If you don’t share pricing, many times companies will just give a bid price and then will lower the price during an actual negotiation once they are awarded the business, so it can take longer to get the negotiated price that could have been offered right from the beginning.

How does your company currently negotiate pricing, do you share pricing between competing companies, or does the company maintain pure integrity and negotiate pricing on the back-end (after the supplier is chosen). Do you agree that both ways can work for the benefit of the supplier and the customer?

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