News Feed

Procurement Negotiations - Keeping It A Win-Win 15 August 2016


The definition of ‘negotiating’ is:

1.    Obtain or bring about by discussion.

2.    Find a way over or through an obstacle


Negotiating is, and always has been, an integral part of the role of Procurement, and however much Procurement evolves, negotiating is likely to remain a key function of it. Procurement and Supply Chain dialogues are typically integrative negotiations, where together all parties can achieve a greater result than would be possible if operating alone. They embrace the symbiotic nature of the relationship between buyer and supplier.

Supply Chains can be highly complex and cross-cultural, but whether the negotiations are multi or mono-cultural, the essence of the exercise remains the same. Ideally, all parties will walk away from the table feeling they have carried the day, rather than lost the battle. This engenders a collaborative atmosphere and a solid basis for an on-going, mutually beneficial relationship between buyer and supplier. Fostering this type of relationship helps to build resilience into the supply chain.

Typically, negotiations should follow a process similar to this:

Phase One:

        1.       Determine your goal – know what you want to achieve from the negotiations

2.       Prepare – understand the nature of your supplier’s business and how they operate

3.       Anticipate – if you understand the supplier, you should be able to determine where certain stumbling blocks may lie. Figure out potential routes around those stumbling blocks so when they crop up at the table, you already have a solution. At the very least, this will catch them off guard and put you in a stronger position. At best, the supplier will be more inclined to acquiesce to your requirements because you’ve already found a solution for them.

Phase Two:

        1.       At the beginning of the negotiations, it may be helpful to start by laying out your ideal outcome. Invite the supplier to do the same. Then you both have an idea of where the finishing point lies.

2.       When you come across contested issues, explain why you want what you want. Use reason and logic.  If the supplier comes up with logical reasons as to why this issue is a sticking point, listen carefully and then together, sort through each point. Ultimately, the goal is to find a way through the obstacle, not bludgeon each other with demands.

3.       Highlight the benefits to the supplier should they follow your chosen course of action.

4.       Ask questions – it could be your (potential) supplier isn’t a skilled negotiator and isn’t fully explaining the context of their objections. Asking the right questions could unlock the whole discussion.

5.       Don’t be afraid to take a break. If you’ve reached a stalemate, agree to think on the issues at hand and reconvene in a few days. A bit of space can allow the creative thinking juices to flow, and a way around the issue may emerge.

6.       Once an agreement has been reached, build in a periodic review schedule. This not only keeps the relationship current but also allows for changes to be made in response to fluctuating markets.

Throughout the negotiating process, it’s essential to keep the debate non-personal. It is a business process, not a personal attack. Keeping that firmly in mind is potentially the most important factor of all.