Tuesday 5 August 2014

A Better Way to Negotiate!

Authored by Usama Shahid

Senior procurement professionals would agree that this is the preferred way to handle alliances and strategic supplier relationships, which collectively account for a large proportion of supply chain spending.

It’s apparent that those suppliers’ teams are making the time to cover every possibility they can think of. The team on the other side of the table? Not so much.Nobody should ever underestimate the importance of securing the support of top management and the heads of the business groups impacted by the negotiation.

Familiarize Your Team with the Supplier’s Company
There should be no excuse for the procurement team not to spend some time reviewing the supplier’s company website in advance of the negotiation event. This easily accessed information will usually provide detailed information about the supplier’s various business lines, operational facilities, growth plans, company history, and so forth.Most supplier websites also have a page named “press releases” that can help get your negotiation team up-to-date on major events affecting the supplier.

Discover the Supplier’s Agenda
The procurement negotiation team can gather valuable information about the supplier’s team and its strategy even before the negotiation begins. We find it useful to e-mail the supplier’s team leader, volunteering our team to prepare a written agenda to be distributed to all participants and requesting two key sets of information. By getting the key information from agenda, procurement team can define points to further negotiate the prices from vendor.

Profile the Supplier’s Negotiating Team Personnel
Now that you have the list of who will probably be on the other side of the table, it’s important to try to get to know these individuals before meeting them in person. Trust takes time to earn; the more you can do ahead of time to establish the foundations of a relationship, the more you are likely to win trust.

Select and Prepare Your Negotiation Team
It shouldn’t be necessary to say that each member of the buyer’s team should be very well prepared for the big day. But in our experience, many procurement negotiators still short-change this basic.

The fundamental step is to ensure that the right players are on the negotiating team. Ideally, they should have been on the cross-functional sourcing team that has been preparing for the negotiations. They should have a common understanding of the history leading up to the negotiation and the goals for it.Team members should be chosen, or excluded, based on their leadership and negotiation abilities. Your team must comprise decision-makers who cover the scope of the negotiable elements to be discussed.

Track Commodities
Commodities are a window into your suppliers’ direct costs. Follow market trends for the commodities that represent the raw materials, energy and labor your suppliers use to make the things you buy. Direct costs, such as raw materials, energy and labor (all are commodities) can be important factors

A Better Way to Negotiate!
Emerging technology is making suppliers’ costs more transparent. This puts Purchasers in the driver’s seat, arming them with better tools and information for more success in direct negotiations.