As a result, OEMs are doubling down on cost control. Procurement teams are under pressure to cut spending and are rejecting supplier price increases unless every cost driver is clearly justified. Without accurate cost models and transparent justifications, suppliers risk losing contracts or being forced into unprofitable deals. However, convincing OEMs to accept these changes is becoming increasingly difficult due to three key factors.
1. Buyers Demand Transparency - But Many Suppliers Lack Cost Visibility
Procurement teams are closely reviewing supplier quotes and expecting granular cost breakdowns of materials, labor, overhead, and logistics. However, many suppliers still rely on manual pricing estimates or costing models based on historical data, making it difficult to explain price adjustments in real time. Without transparent, data-backed justifications, suppliers risk losing credibility in negotiations.
2. Rising Costs Make Profitability Harder to Maintain
Global price volatility is forcing suppliers to manage increasing costs across multiple areas:
- Material costs: Commodity price fluctuations have increased the cost of key inputs, yet many OEMs are unwilling to adjust contract terms accordingly.
- Labor and overhead: Rising wages and workforce shortages are driving up production costs, further squeezing supplier margins.
- Logistics expenses: Higher freight rates, tariffs, and energy costs are affecting total landed costs, making long-distance sourcing less viable.
OEMs expect suppliers to find cost-saving alternatives rather than simply passing on price increases. This puts suppliers in a difficult position: either absorb the costs and reduce profitability or increase prices and risk losing the business.
3. Manual Quoting Slows RFQ Turnaround and Reduces Competitiveness
For suppliers, speed matters in RFQs. The industry rule “first in usually wins” still holds, yet many companies rely on time-consuming, manual quote generation. This process is often dependent on tribal knowledge, where different estimators may use inconsistent methodologies to price the same part.
Without automated, structured cost models, suppliers face two risks:
- Underpricing, which reduces profitability.
- Overpricing, which drives buyers toward competitors offering better cost transparency.
In an environment where OEMs are aggressively seeking cost reductions, suppliers need a way to prove their pricing structure quickly and accurately—before the contract goes to someone else.
Why Cost Management Software is Essential for Stronger Supplier Negotiations
To compete in this environment, suppliers need to move beyond traditional pricing models and adopt a data-driven approach that ensures cost visibility and defensible pricing structures.
Detailed Cost Breakdown
Tset enables suppliers to create structured cost models that clearly separate material, labor, logistics, and overhead costs. By providing a transparent view of cost drivers, suppliers can show OEMs exactly where price increases stem from, making negotiations more fact-based and less contentious.
Real-Time Data for Stronger Negotiations
Instead of relying on outdated pricing assumptions, Tset integrates market data into cost calculations. This allows suppliers to justify pricing decisions with current industry benchmarks, reducing the likelihood of price pushback from procurement teams.
Scenario Simulations for Alternative Cost Strategies
With Tset, suppliers can run "what-if" simulations to evaluate alternative sourcing options, process optimizations, and pricing structures. This enables suppliers to proactively present cost-saving alternatives, positioning them as strategic partners rather than just price providers.
