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.