Loading

Cross-Functional Learning


Our well-rounded business content is designed for Leaders & Managers to implement change with ease & improve accountability amongst their teams. Here you’ll find Articles from thought leaders in their fields, have access to practical Business Templates, learn new skills from On-Demand Webinars & connect to our Expert Panel to answer your organizational challenges. Stay informed & proactive…Join Us Today!

Join Now

Choosing The Best Negotiation Tactics

By Julie Brignac (1316 words)
Posted in Purchasing & Supply Chain on September 10, 2013

There are (1) comments permalink

Add to My Toolkit

As we all know, negotiations happen everyday in our professional and personal lives.  Whether we are negotiating a large multi-million dollar contract with a vendor, buying a new car, or simply negotiating with your 9-year old on which vegetables they will eat for dinner, the fact is that negotiation is a routine part of all of our lives.  But for those of us in a supply chain management career, choosing the best negotiation tactics in order to yield the best result can be difficult to spot – and challenging to execute.

 

I think that those of us who negotiate for a living have our preferred process in which to negotiate, especially with suppliers.  When starting negotiations many supply chain professionals (not all, because I am not trying to broad-brush everyone into one category) fall into traps when focusing solely on figuring out who has the most leverage, or power, in the relationship, and then building their plan of attack from there.  For example, if the buyer’s company has more leverage, many buyers view that as a position of power and use it to their advantage.  There is certainly nothing wrong with this – unless the position of power is abused or used arrogantly.  If the supplier has most of the leverage, buyers must obviously recognize this, reacting either in defeat or maintaining their position of power because they are the one writing the check.  In either case, the buyer has not truly determined the best strategic course of action for the negotiation and, in the end, the result will be less than favorable for everyone.

 

So how can the supply chain management professional learn to strategically assess a situation and properly prepare for a vendor negotiation, without falling into the traps that I just portrayed?  The examples that I used are simple, perhaps oversimplified, but they are realistic when considering how little supply chain professionals properly prepare for negotiations.  We all have a tendency to “wing it”, and this ultimately does not serve us well.  The answer is remembering some basic tactics when negotiating so that you, the supply chain expert, can always control the situation.

 

3 Tactics to Make Your Supply Negotiations More Strategic

  

Tactic #1 – Always Prepare  

 

Remember what I said about “winging it”?  We are all guilty.  But properly preparing for a negotiation, no matter how large or small, will always give you the upper hand.  Here are some key things to do when preparing for a negotiation:

 

  • Pull the obvious data.  This includes supplier spend reports, contracts, or any other documentation that you may have with an existing relationship.  Be sure to analyze it and draw some conclusions from it, while looking for any opportunity to improve upon the last contract or commercial scenario.  If it is a new supplier to you, pull their Dun and Bradstreet report, annual report from their website (if publically traded), or any other market data that is specific to the supplier or their industry.

 

  • Pull the “not-so-obvious” data.  Take the time to research any market data for the supplier’s industry, specifically looking for trends in the market that could influence their negotiating position.  If their product or service is commodity influenced, pull the pricing indices for the last 1-3 years, as well as any market research or publications regarding future pricing trends.  This information can offer you some valuable insight during your negotiations, especially if your supplier has not prepared as thoroughly as you.

  

Tactic #2 – Always Take at Least 2 Minutes to Have a Proper Welcome

 

This tactic may sound a bit strange – and warm-fuzzy – but it’s very powerful.  Think about it for a moment…….when you begin any conversation asking how someone is, or asking about their children, vacation, or that picture on their desk, don’t you normally get a response that is warm and welcoming?  Before a negotiation, using this tactic sets a warm tone that can be very powerful during your commercial discussions.  It can prevent a negotiation from becoming adversarial and competitive, which can deadlock negotiations.  But, only spend 2 minutes – too much of a good thing can be bad.

 

 

Tactic #3 – Learn to Use and Recognize Persuasion Methods

 

Persuasion methods are one of my favorite tactics to use in a negotiation.  However, I must first disclose that Persuasion Methods are not my theory, nor do I own them, as I must give the credit for these tactics to Paul Steele, author of numerous business negotiation books and articles.  I had the privilege of learning about and teaching his concepts on Persuasion Methods several years ago, and I find them to be most valuable.  While I cannot adequately explain all the methods in this article, I can identify them and briefly comment on their usefulness in negotiations that I have participated in.

 

The Five Persuasion Methods Are:

 

1. Emotion

Learn to recognize the difference between emotion and emotional, and when to use emotion to control the negotiation.

 

2. Logic

Referencing back to Tactic #1, be prepared and use your data to your advantage.

 

3. Threat

If necessary, veiled threats are most effective versus outright threats, and never threaten without being prepared to follow through.

 

4. Bargain

Many people think of bargain and compromise as the same thing, but they are different.  Bargaining is the art of each party offering something up in the negotiation in exchange for something else.

 

5. Compromise

The difference between compromise and bargain is that compromising means offering a concession on your best-case deal, but the other party is not aware of it.  Thus, the point is to be prepared to enter the negotiation knowing your best-case deal, acceptable deal and worst-I-can-live-with deal.  And remember, compromise is not defined as win-win or 50/50 in terms of concessions made by both parties.

 

 

The art of negotiating is a complex topic discussed by many, yet mastered by few.  However, start your education with a focus on being prepared and choosing the best tactics, and you will mostly likely be miles ahead of your opposing party in the negotiation room.

 

 

{#/pub/images/JulieBrignac.jpg}

Written by Julie Brignac, Principal, Vantage Partners, and a member of the firm’s sourcing and supply chain management practice.  She has worked as a transformational leader in globally matrixed organizations, with over 20 years of strategic and operational experience in supply chain management, international outsourcing, sales and operational planning, procurement transformations and business process improvement initiatives. She is the inventor of The RoSS Model®, an end-to-end project benefit financial validation process that helps organizations predict, report, and reconcile project benefits to financial statements, specifically in the supply chain arena. Julie is an Associate Adjunct Professor for the Undergraduate School of Supply Chain Management at the University of Maryland, as well as an Adjunct Professor of Online Learning for the Whitman Business School for Syracuse University. 

 

Do you have a question for Julie?  Post it in our Purchasing & Supply Chain Community, she will be happy to help: Ask an Expert

 

Did you find this article informative?  Let us keep you up-to-date on all of our training articles. Please sign up for our newsletter today!  


Here are some additional training articles you may be interested in: 

Defining the Best Organizational Structure for Your Business

Ten Ways to Prepare for a Tough Negotiation

Work Efficiency Equation For Managers And High Performers

Six Success Tips For Operations Professionals

Dealing With Difficult Personalities

   

At ManagingAmericans.com we customize organizational tools that discover & unlock the true potential of individuals and organizations. Our focus is to align objectives, engage people & link strategy to execution. We support that effort with 30+ Expert Consultants providing exclusive management & leadership training & management consultancy services in one easy to use location.

 

Comments (1)

Tim Cornes posted on: September 12, 2013

Thanks

Fully agree with the points made, "fail to plan then plan to fail".
I would also add that in preparation part:

Define what is the successful outcome you want, clear boundaries and aims.
Ensure you have authority and they do to finalize the deal
If in a team, who does what.
What signals and body language to use or avoid
What are you prepared to use as concessions, what are they likely to concede i.e. If......then.....
Establish your 3 stages of proposal, Opening offer, preferred and walk away.

Leave a comment

Not a robot?