The secret to effective negotiation is simple: agree on the right price. Easy, right?
Well, you already know there is more to excellent negotiation than that. If your primary method of negotiation is by focusing on price and only price, you’re placing blinders on yourself that obscure the wide range of potential opportunities in a negotiation.
If you see yourself as a hammer and the other party as a nail, what happens when you hit that nail at the wrong angle? It bends, making it useless. That’s what happens when a negotiation becomes tunnel-visioned on price.
Supplier Relationships Are Changing Fast: Can You Change with Them?
Negotiation in the 21st century involves an element of innovation that comes from viewing the other party’s success as your own. Finding savings in Supplier-Enabled Innovation (SEI) such as:
- improving logistics and delivery, often on a global scale;
- sharing information in more strategic ways through Electronic Data Interchange (EDI);
- improving efficiency through creative staffing, such as dedicated service personnel; and
- aligning internal stakeholders to remove time-consuming administrative obstacles.
Supplier relationships (and those with non-supplier parties) will continue to evolve, forcing negotiators to grow with them. Negotiators that are otherwise too stubborn in their ways will essentially be incapacitating themselves in the future. Here are four ways you can avoid sabotaging your negotiations with suppliers.
Sabotage #1: You’re wasting time and money by not consolidating
All major corporations depend on just a few suppliers to succeed. One study* linked an indirect spend cost reduction of 3.35% and a reduction of equipment and supplies cost of 9.18% due to supplier consolidation.
Think of it this way: as the number of your suppliers shrinks, the average negotiation becomes larger and more complex. There are more variables on the table and opportunities to find value for each other outside of single
The result: consolidation saves time and money once you eliminate the hours you used to spend handling many products from many suppliers. When all parties have fewer choices, it is easier and faster to manage other time-consuming processes like non-standard purchases.
Do you have the skills to navigate these larger, more complex negotiations?
Sabotage #2: You’re *only* focused on price
Although purchasing might be measured on savings, future success is more likely to be found in your supplier relationship. This changes the outlook of a“zero-sum” negotiation drastically.
KPIs are beginning to expand to include revenue growth, innovative approaches, customer satisfaction, and risk management.
Creating a long-term transparent relationship with your suppliers will help you predict and reduce potential supply chain disruptions before they become major problems. In order to do so, you’re going to have to build the skills to ask the right questions and listen with an intent open curiosity to better understand and earn the trust of your suppliers.
The result: a reciprocal partnership in which suppliers explore creative solutions that will help everyone win more.
Do you have the skills to build rapport and come up with creative solutions in your negotiations?
Sabotage #3: You’re just an order-taker
If you’re just stuck taking orders from internal customers, you’re only limiting yourself in a time where you should be exploring and ramping up your relationship building. You should be sharing your expertise for resource selection, understanding the objectives and plans of internal operating groups, and working side-by-side with internal customers to tackle the big business problems.
The result: Using your negotiation skills inside your organization as well as with outside vendors, instead of simply just taking orders.
Do you have the negotiation skills to get things done by people you have no direct authority over and gain the cooperation of your colleagues for important projects?
Sabotage #4: Your team members are damaging your negotiation and undermining your efforts
The fourth sabotage is one that sneaks up on many negotiators since it is not within their immediate control. Products and relationships will continue to become more complex, and purchasing often spans several borders. This means you’ll likely end up being responsible for coordinating multiple people on your team.
Without crystal clear direction and effective negotiation skills, or at least a general negotiation framework, your internal team members may end up accidentally damaging the positions you’ve worked so hard to build.
The result: Your entire client and business-facing team needs to learn effective negotiation skills.
Do you have the skills to coordinate a larger team negotiation strategy?
Final Thoughts
Building mutually beneficial relationships with your suppliers mean going above and beyond simply focusing on pricing. Pricing tunnel vision will ultimately blind you to strategic opportunities and cheapen your long-term relationships.
Sources
*“The Benefits of Supplier Consolidation Extend Far Beyond Sourcing Savings” by The Hackett Group, written by Pierre Mitchell and Christopher Sawchuck
