Winning Strategy in Procurement Negotiations – Moving Far Beyond Excel
Most professionals in procurement want to develop a strategy to win consistently in negotiations.
I am not referring to a method to get price concessions every time.
If you are using Excel for your complex awards and sensitivity analysis, you are giving up a strategic advantage to your suppliers and competitors.
There are also optimization tools in the market that are very challenging to use. I know of several companies that have given up using them.
There is a better way.
You can now have the information you need at the time of decision and that is a very powerful asset in this lightning fast business world.
Price concessions are normally great but what if you are giving up more than the concession is worth?
Let me explain why.
I have done plenty of sensitivity analysis in my career especially during budget preparation.
In my first role direct materials had a major impact on our profitability.
My goal was to provide my bosses with information that would help them know the impact of price concessions on either side.
Unfortunately, the tools I had didn’t allow me to provide more than a handful of scenarios because each one took so long to create.
One other thing that was a certainty, if there was time, someone would ask another “what if” question.
How often does your boss ask, “I wonder if you could run another scenario with ……. …?”
Although Excel is far more powerful then the versions I used, handling complex award scenarios is time consuming and prone to error.
This is where optimization tools can give you a significant strategic edge.
These tools are getting smarter and the return on investment can be enormous.
With the right tool you can create new scenarios in minutes. Yes, minutes.
The processing speed and power is astonishing.
Once you have a tool, you will have a decided advantage over your suppliers and your competitors.
Let me explain with an example.
Cost is often a key determining factor in choosing a service provider. A common approach is to ask for better pricing based on giving a service provider more locations.
This seems straightforward and you might believe that you have a handle on this.
With the right optimization tool, you can calculate the exact impact of a price change in minutes not days.
Starting with a base case, you can create multiple new scenarios. There is almost no limit to the number of constraints you can apply to each scenario.
You can quickly modify an existing case to fit their exact offer and know the impact by the time you get back with a fresh coffee.
You can do this whether you are doing the negotiation in a Zoom meeting, on a call or face-to-face.
Wouldn’t that be a powerful tool to have in your arsenal?
There is one significant added benefit. You can be sure the analysis is correct. Simply line up your scenarios and it should be obvious if something isn’t correct.
Spreadsheet errors will be a thing of the past.
Your service provider or supplier may be surprised at the speed of your response – or astonished.
Optimization is the software tool that harnesses big data, storage capacity and computing speed to give you the negotiation edge you want.
Regardless of the sophistication and skill of your Excel users, imagine what your Excel wizards could do with a tool like this.
Greater efficiency and increased profits are just two of the benefits.
The ability to determine the impact of one change or multiple changes almost instantly is a dream. Or the ability to know with certainty that any idea actually costs more. The scenarios are so fast to create, you’ll run almost anything just to see what happens.
If you have events with multiple constraints or with a sizeable number of items or suppliers, consider adding an optimization tool to your team’s arsenal.
If you would like to see a demo of this powerful tool, click this button to set it up.
Ask better questions, make changes and 2020 will be your best year ever.
Action Step: If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want.
If you want to go explore this topic in greater detail, please contact me. 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 what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success©
Commit to taking the next step.
Until Next Time, I Wish You Great Success in Your Business and in Your Life