Purchasing managers I have met tell a different story. Most have cost reduction objectives and many receive bonuses based on it. The target set is often 5 per cent, which is hardly stretching, on the basis, presumably, that 10 per cent seems too much and 0 per cent is not a reduction.
Salespeople have also asked me: “What is this ‘buyer’s 5 per cent’ we are asked for?” Sellers often respond by adding 10 per cent to their price so that they can take 5 per cent off: the target is achieved, everyone gets a bonus and the price goes up. (more…)