Supplier Negotiating Skills – Preparation and the Ability to Adapt are Critical to Success
The professionals with the most success in negotiations come prepared. Preparation allows them to seamlessly adapt regardless of the tactics the supplier uses.
If you watch great coaches in sports they always seem to have the answer to their opponent’s tactics. Even if the opponent is using a strategy that is unusual they seem to be able to counter it.
Over the years, I have been involved in countless negotiations.
If I have learned one thing it is this: you can never spend too much time preparing.
I would like to offer one other observation for your consideration. I believe that one of the fundamental goals of negotiation is to help your organization better meet customer needs. This naturally includes internal and external customers.
Let me share some questions to contemplate and some thoughts on steps you can take to improve your negotiation skills.
- The ability to negotiate is a necessary skill in today’s global market.
- Great negotiators understand the value of what they are offering and what is being offered to them. This allows them to counter appropriately. You can’t expect to get a million-dollar concession if you are offering a fraction of that.
- Prepare a list of potential offers a supplier could make and determine your response to each one.
- Consider starting with purchases that are less critical to your operation. This approach will allow your team to hone their skills on a lower risk purchase.
- What negotiation points do you have to offer other than volume?
- Are there issues with the incumbent that need to be addressed by a new supplier?
- How much of the current volume are you willing to put out to bid?
- How competitive is the market for the product or service?
- How many alternate sources are available?
- What is the cost to change? Since costs are rarely the same for all volume levels, consider preparing an analysis for ranges of purchases. This approach is similar to a breakeven analysis.
- How quickly could an alternative supplier gear up?
- Do any of the alternative suppliers also supply a key competitor or multiple key competitors?
- How important is the business to the incumbent?
- Are there any other factors or relationships that might impact the outcome?
Early in my career I was put in a no-win situation in choosing a consultant. The incumbent put forth a bid that was considerably higher than two other bids. The CFO had close ties to the incumbent. I prepared a thorough analysis of the bids and recommended a change. I was overruled and the incumbent was retained.
It wasn’t the happiest day of my career. It was a valuable lesson that helped me in other negotiations.
Next week I will provide insights on when to walk away from a negotiation.
Action Step: Every organization can get better. Finding and creating success is often a matter of taking the first step. If you are uncertain where to start, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want. If you would like to explore this topic in greater detail, please contact me.
If you want to explore a purchasing or procurement topic in greater detail, I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that my recommendations will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
Organizations of all sizes are reducing costs and increasing efficiency, without changing the way they conduct business. If you would like to know how, simply give me a call or send me an email with your contact information and the best time to reach you.
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Think about it.
Until Next Time, I Wish You Great Success in Your Business and in Your Life