Even with some of the COVID-related disruptions starting to appear in the rearview mirror, procurement professionals still struggle with the same stubborn issues.
From problems with inflation and supply chain resiliency to geopolitical pressures and natural disasters, businesses must develop robust strategies to tackle these common problems. One critical skill that should be a staple part of any approach to procurement is negotiation.
In his article published in Global Trade Magazine, RED BEAR Negotiation expert Mike Slomke outlines what procurement professionals face in 2023 and offers us some insight into the power of negotiation.
Let’s explore Mike’s advice and discover how the right negotiation training can make all the difference for procurement professionals in 2023.
Three Skills to Improve Your Procurement Strategy
Inflation. It’s a big problem; and a stubborn one.
While PPI data shows inflation peaked in March 2022, it’s been a hard journey back to a pre-COVID baseline — if we are able to get there at all.
As Mike describes, “inflation impacts direct sourcing costs through services and raw materials that go into making a product.” But, more than that, it also creeps into indirect sourcing costs:
- Office suppliers
- Travel
- Utilities
- Janitorial services
- Employee benefits
Inflation creep is a big problem for virtually every business across every industry. But, unfortunately, for procurement teams, inflation is just one challenge. Mike also explores other threats like geopolitical pressures, natural disasters, and supply chain disruptions.
So, how can global enterprises tackle these issues? What role does negotiation play in these situations?
1. Supply Chain Resilience and Supplier Agreements
With rising costs, it’s easy to focus solely on money. But, Mike argues, this just isn't the right strategy.
When it comes to procurement negotiation, businesses must negotiate comprehensive supplier agreements that cover more than just price. This could be agreements around factors like inventory management, supply chain flexibility, and open lines of communication to ensure continuity in times of disruption.
Strong relationships with suppliers are critical. They not only result in more long-term value but are the key to navigating the complexities of supply chain disruptions.
Mike puts it well: "good supplier relationships can get you more than your fair share of attention, prioritization, and service during difficult supply chain conditions.”
2. Procurement Negotiators: Your Secret Weapon
These last few years have presented unique challenges for procurement organizations. Often, the first reaction is to pursue, as Mike explains, “short-sighted cost reductions.”
The real stopgap to battle inflation creep isn’t in cutting costs but in understanding the value of negotiation. All the value delivered by procurement is negotiated. If it’s not, businesses are leaving these mission-critical discussions up to chance — not a good strategy at all.
Businesses, then, should see procurement negotiators as the real stopgap to tackle inflation creep. As Mike argues, “expert procurement negotiators with well-defined negotiation processes are key to delivering value and safeguarding a company’s bottom line.”
3. The Right Negotiation Process Matters
Lastly, the article covers the importance of establishing standards and processes around procurement negotiation. Having a well-defined negotiation process, accompanied by a common language to ensure alignment across teams, is the key to maximizing the value of deals.
Mike reviews the six negotiation principles that drive all successful negotiations:
- Position the case advantageously
- Set high aspirations
- Manage information skillfully
- Know the full range and strength of your power
- Satisfy needs over want
- Concede according to plan
Of course, this is only a taste of Mike’s powerful insights. To get the full article, be sure to check out Mike’s article in Global Trade Magazine.
Beyond the Article: Mastering Procurement Negotiations
Mike outlines some key negotiation skills that can help any procurement professional navigate the turbulence of 2023. While the power of implementing these strategies can’t be overstated, there’s much more to procurement negotiations than meets the eye.
To help you connect the dots, and understand the power of RED BEAR Procurement Negotiation Training, let’s dive deeper into a few concepts Mike discussed in the article.
Building Strong Supplier Relationships
One of the big points Mike explores in the article is the value of relationship building. For seasoned negotiators, this should come as no surprise.
Strong and long-term relationships are often the secret to tackling stubborn supply chain disruptions. But how can you build these relationships? Well, it’s all about mastering the three dimensions of negotiation.
Here at RED BEAR, we teach the fundamentals of negotiation, which includes an exploration of the three dimensions of negotiation:
- Competitive
- Collaborative
- Creative
The first dimension, competitive, should come as no surprise. Even individuals with little to no experience in negotiation understand the competitive environment. What they fail to understand, though, is the value of the other dimensions.
When you take a purely competitive approach, you often end up with win-lose outcomes. You might get what you want but at the cost of the relationship.
Instead, skilled negotiators focus on balancing the competitive dimension with the collaborative dimension. When they do this, they approach the discussion from a place of understanding and transparency. It’s not about manipulating or overcoming the other party but rather about finding common ground and solutions that satisfy both sides' needs.
When you can strike this balance in procurement negotiations, you can explore the creative dimension — which often results in outside-the-box thinking and win-win outcomes that nurture and build valuable supplier relationships.
Investing In the Right Training
The right negotiation training matters. Out in the market, you’ll find dozens of organizations focusing on manipulative tactics and one-time-use strategies.
“The right negotiation training matters.”
These approaches just don’t work. If they do, it’s not indicative of how other negotiations might play out. Rather than focusing on tactics, the right training will focus on the principles and behaviors that drive successful negotiations.
That’s what RED BEAR Training is all about. Our goal is to transform your team into world-class procurement negotiation professionals. That means focusing on the methods that get long-term results and help maximize the value of deals.
Investing in the right training does much more than prepare your team. It can also provide some other key benefits:
- Negotiation training is a future-proof skill that can advance career development by showing your team how much you value their individual career growth.
- Investing in learning and development efforts is a great strategy to attract the best and brightest to work with your business.
- The right training engages employees and helps businesses achieve and maintain a corporate advantage in a highly competitive economy.
RED BEAR: Your Partner in Procurement Negotiation Training
RED BEAR is no stranger to procurement negotiation.
We've spent years working with the Fortune 100 heavyweights, and we've got the know-how to help your business sail through 2023 and beyond. How? With negotiation training that's all about procurement and, best of all, delivers real results.
If you’re looking to get more insights from RED BEAR experts like Mike Slomke, be sure to connect with the team today.
