A supply chain negotiations expert has urged professionals in supply chain and procurement jobs, whether they’re permanent employees or procurement interims, to hone their negotiation skills – a learning journey that begins by understanding that negotiation isn’t a single event but a continual process.
Business negotiation skills expert Jan Potgieter maintains that a failure to recognise this distinction allows significant value to needlessly escape from the supply chain. The original Latin meaning of ‘negotiation’ was anything that was not leisure. For him, the process begins the instant practitioners in procurement jobs make contact with internal stakeholders or suppliers.
Here are his three essential strategies for effective negotiation:
- Who makes the first offer? The conventional assumption is that sellers make the initial offer. However, Potgieter believes that conventions can on occasion be suspended: if the procurement pro senses that vendors believe they hold the ‘Ace’ card in the negotiation, they can often extract a better deal by clarifying (and resolving to stick to) the department’s budget aspirations. This prevents suppliers from ‘trying it on’ and inflating their pricing or skimping on discount options. Alternatively, if the power distribution seems more evenly balanced, it’s often very effective to make the first offer in the form of either a budget or a target price. This is a strategy that tends to ‘peg’ the vendor’s expectations more closely to the purchaser’s aspirations instead of their own wish list.
- Don’t go into ‘hardball mode’ at the outset: many procurement pros slip into a competitive/’hardball’ negotiating strategy out of custom. This can backfire – vendors don’t like feeling coerced or squeezed and, like all human beings, may be more inclined to put forward their best offers to negotiators they consider fair, likeable and genuinely cooperative.
- Keep in mind that negotiating is about people: having several tried-and-tested strategies at your disposal is all well and good, but deals are made when people feel heard and appreciated, reasonable concessions are made, opportunities are opened, and problems are mutually resolved.