Payment and costing
What the price is made of.
A quotation is a single number covering several very different costs. Some are fixed by the market and cannot move, some are the supplier's margin, and some are things you asked for without realising they had a price.
The components.
Roughly in the order they resist negotiation.
- Raw material
- For agricultural goods this tracks a market the supplier does not control. Pressing on it produces a worse product rather than a lower price.
- Labour
- Set by the region and the skill. Indonesian labour costs vary between Java and the eastern islands more than buyers expect.
- Energy and processing
- Drying, roasting, freezing and distilling all cost energy, and this is where a cheap quotation is usually cutting.
- Packaging
- Frequently a large share and almost always the part you specified loosely, so the supplier chose the cheapest option.
- Compliance
- Certificates, testing and audits cost real money. A supplier holding certification you asked for is carrying that cost.
- Finance
- The supplier is funding raw material until you pay. Payment terms are a price component and they are negotiable in both directions.
- Margin
- Usually smaller than buyers assume, particularly at workshop scale.
What moves and what does not.
Raw material does not, on commodities. A supplier who agrees to a price below the market is either substituting quality or will not deliver.
Packaging moves a great deal, in both directions, and it is where you can add value or take cost out deliberately.
Payment terms move. A deposit or faster payment is worth real money to a supplier funding raw material, and it is often a better lever than price.
Volume moves it, and less than buyers hope at workshop scale where the constraint is people rather than machines.
Specification moves it. Tightening a tolerance raises the price honestly, and loosening one you do not need lowers it.
Negotiating the right thing.
Ask for the price to be broken down rather than lowered. Most Indonesian suppliers will do it and the conversation changes immediately.
Trade something they value. Longer lead times, a forecast, an earlier payment or a simpler specification all cost you less than they save them.
Be suspicious of a large drop with no change in what you asked for. Something is being substituted and you will find out on arrival.
Questions buyers ask.
Why will they not go lower?
On agricultural goods, usually because the raw material is a market price they pay. A supplier who agrees anyway is planning to substitute, which costs you more than the discount.
What is the best thing to negotiate?
Payment terms and packaging, in most cases. Both are worth real money to the supplier and neither degrades the product, unlike pressing on unit price.
Should I ask for a cost breakdown?
Yes, and many will provide one. It moves the conversation from a number to a set of decisions, and it shows you where the flexibility genuinely is.
Read next.
Negotiating without breaking the order
Six moves and four traps, about business mechanics rather than national character. What to fix before you discuss price.
How to read an export quotation
Nine things a quotation has to say before it can be compared to another. What each line means and which absences matter.
Working out a landed cost
Everything between the factory price and the shelf. The twelve lines it contains, and the four that buyers forget.
Paying an Indonesian supplier
T/T, letters of credit and documentary collection, what each actually protects, and the five rules that stop a deposit disappearing.
What a fair price means
Below-cost buying moves the cost somewhere you cannot see. How to think about it properly.
Sourcing from Indonesia?
Tell us the product, the quantity and the destination. We come back with what it involves before anyone talks about money.