Master Procurement Negotiation in 6 Easy Steps
Whether you have 20 years of procurement experience or you’re new on the supply chain scene, negotiating contracts with suppliers is often intimidating and stressful. Procurement professionals aren’t always trained in the art of negotiation, although the salespeople they’re working with are usually very well-trained. These easy steps will give you the edge you need to negotiate deals like a pro.
Step 1: Do Your Homework
Preparation is everything when it comes to negotiating. Before you sit down with a supplier, do plenty of research on the products you’re purchasing. Understand current market trends and pricing, as well as alternatives available from other competitors. If possible, get to know your supplier and the tactics they use to make sales. Even a small amount of knowledge gives you a big advantage at the table.
This article is for Premium Members only. Please login below to read the rest of this article.
Not a Premium Member yet? Become one today.
[show_to accesslevel=’Premium Members’]
Step 2: Choose Your Arena
In today’s world of digital communication, face-to-face negotiations are still preferred in most supply chain situations. Meeting at your supplier’s office can have several advantages, but many people feel more comfortable in their own territory. An off-site meeting is a neutral alternative. Wherever you agree to meet, avoid sitting face to face. Opt for a more collaborative, non-competitive seating arrangement.
Step 3: Make Your Offer
A well-prepared negotiator often has an advantage when they make the first move. As you’re doing your homework, set your expectations and develop your opening offer. A reasonable figure, backed by reliable data, provides both sides with a foundation to build upon. A good first offer is generally slightly higher than the estimated top dollar of the supplier, based on your research.
Step 4: Listen and Ask
The biggest mistakes people make during negotiations are talking too much and listening too little. Both sales people and purchasers are guilty. After the first offer is on the table, watch your counterpart’s reaction closely and listen to their needs. Ask questions that will help you understand their side better, but don’t divulge too much information of your own.
Step 5: Be Aware of Tactics
Sales people are often trained in negotiation and may have several techniques under their belt. In a negotiation, both parties want to gain the most possible benefits so your opponent may not give in easily. Pay attention to body language and facial expressions that may give more insight into your supplier’s side of the deal. Remember that your first offer is a starting point and will usually be countered, but watch out for tactics like flinching and bluffs.
Step 6: Stay Flexible and Don’t Give Up
A negotiation is “a discussion aimed at reaching an agreement.” Procurement professionals who develop solid relationships with their suppliers are usually more successful than those who make quick deals based solely on price. A mutually beneficial contract that meets the needs of both parties will give long-term benefits. Give your supplier choices by presenting two or three offers at once and stay open to counter-offers until you both agree.
Remember that negotiations are not wars between buyers and sellers. When you’re armed with a little info and the right attitude, you can close any deal.[/show_to]
Global Procurement & Supply Chain Professionals Read This…
…Carefully curated procurement & supply chain issues that make you look smart, sent to your inbox every week.
PLUS: Get the FREE Procurement Case Study when you subscribe: “How McDonald’s Overcame Global Supply Chain Obstacles”