Peak season is prime time for procurement professionals. During this time, supply chains face added stresses as businesses ramp up their operations to meet the needs of customers and clients worldwide.
This period is the stress test where procurement professionals see if their procurement negotiation strategies either hold firm or buckle under the strain of rising demand or changing expectations.
As Peak Season swiftly approaches, assessing your negotiation strategy should be a top priority. Leading procurement teams have spent the last few months actively seeking to address any shortcomings from the previous year. High-performing negotiators know it is essential to ensure that your contract negotiations are prepared for the busy season.
However, it’s not too late to look for innovative ideas to help your team stay ahead of upcoming challenges. Successful negotiation strategies rely on a foundation of supplier relationships that deliver value not only during times of stress like peak season but also in the long run.
RED BEAR Senior Instructor Eric Imrie recently shared insights with IndustryWeek, in his article, Turning Peak Season Pain into Gain: 5 Strategies for Supplier Negotiations.
Let’s explore Eric’s insights for conquering Peak Season’s challenges.
The Foundation for Procurement Success
There’s no easy way out when planning for Peak Season. All successful negotiation is built on key negotiation principles and behaviors that are proven to deliver results all year round.
These key principles include positioning your case advantageously, setting high expectations, managing information, understanding your power, prioritizing needs over wants, and planning your concessions.
But how do those behaviors come into play for peak season?
They lead to stronger supplier relationships that can adapt to challenges and deliver value on both sides. Here are five steps Eric covers in his article on how to implement those principles and behaviors for positive supplier outcomes during Peak Season:
1. Align Internal Teams
During Peak Season, a lot of challenges may be outside of your procurement team’s control. What is in your control? Aligning your team to create supplier-base visibility.
As Eric shares in the article, “I’ve seen firsthand, while working in procurement at a Fortune 500, how misalignment negatively impacts the bottom line. I was walking through our open-plan office and saw a whiteboard with a list of supplier names for projects one of my team members was working on. A few days later, another team member in a different category came to me for advice on a negotiation — with the same supplier.”
Here, internal misalignment weakens your negotiation power which can directly affect the profitability and positive outcomes of your agreements. By creating alignment, you gain the ability to develop a comprehensive supplier strategy that plays into your strengths and supports your organization’s Peak Season goals.
Invest in the time to outline common supplier challenges and identify gaps. You’ll end up with a greater understanding of your negotiation power and a more resilient supplier strategy.
2. Build Long-Term Supplier Partnerships
The next step for strong supplier relationships is to think of your suppliers as long-term partners. Your wins are their wins, so your agreements should be framed as win-win agreements too.
Once you’ve identified your complete supplier base, start acting on the insights and opportunities your team identified — but keep a long-term focus. These long-term relationships are the ones that will be invaluable during times of crisis or stress.
If you are your supplier’s first book of business, you’ll have greater influence over the negotiation process. Starting long-term planning with reliable partners will help ensure your Peak Season needs are met year after year.
3. Prioritize Needs Over Wants
Now that you’ve identified the suppliers who are critical to a successful Peak Season, it’s time to start crafting your agreements. With the goal of win-win agreements, collaborative strategies are key — starting with knowing and prioritizing needs over wants for both you and your supplier.
This approach will help you craft creative agreements that can withstand the pressures of tight deadlines. Instead of discounts and competitive pricing, think joint marketing or specific delivery schedules.
As Eric shared in the article, creating tension through silence can be an effective negotiation behavior to combine here.
As he notes, “I was negotiating across the table from a long-term supplier and asking for a 5% savings or increased value over the next 12 months. I put the request out there and let the silence hang. The supplier sat for a moment and replied, ‘How about we stop fighting about cost reduction and pricing, and we try growing sales and profit?’
Together, we worked with our merchandising team on cross-selling and upselling opportunities as well as new product opportunities. This creative approach had a positive impact on profitability and sales growth for the company. Without that silence, this creative solution with a long-term partner may never have surfaced.”
4. Plan Concessions
Now that you have a better understanding of both parties’ needs, you can begin to craft a win-win agreement. This is where the push and pull of concessions will come into play.
Concessions are a part of any collaborative agreement, but the most skilled negotiators know these concessions must be a part of a careful strategy and not left to chance. It is vital to have a well-thought-out plan for each concession you make.
Be clear on the numbers or factors you are willing to concede and what you expect in return for those concessions. Prioritize trade opportunities that offer significant benefits to the other party while requiring minimal cost from your end.
5. Make a Plan
Success during peak season requires early preparation, meticulous planning, and the ability to execute or adapt. Use the steps outlined above to build a procurement strategy with a supplier negotiation plan that delivers all year round and is resilient to last during times of stress or high demand like Peak Season.
As Eric notes, “Multi-million-dollar deals cannot be left to chance.”
Get Ahead of Peak Season Procurement Challenges Now
By adopting a collaborative mindset and having a well-defined negotiation strategy in place, you can ensure a successful partnership that yields positive returns year-round.
Don't wait for crunch time to implement these methods. Start building a solid supplier and procurement strategy now for long-term success.
Be sure to check out Eric’s full IndustryWeek article here.
If you want to go beyond the article and start your own procurement negotiation training journey, be sure to connect with the expert team here at RED BEAR.
