As we all know, negotiations happen everyday in our professional and personal lives.  Whether we are negotiating a large multi-million dollar contract with a vendor, buying a new car, or simply negotiating with your 9-year old on which vegetables they will eat for dinner, the fact is that negotiation is a routine part of all of our lives.  But for those of us in a supply chain management career, choosing the best negotiation tactics in order to yield the best result can be difficult to spot – and challenging to execute.

I think that those of us who negotiate for a living have our preferred process in which to negotiate, especially with suppliers.  When starting negotiations many supply chain professionals (not all, because I am not trying to broad-brush everyone into one category) fall into traps when focusing solely on figuring out who has the most leverage, or power, in the relationship, and then building their plan of attack from there.  For example, if the buyer’s company has more leverage, many buyers view that as a position of power and use it to their advantage.  There is certainly nothing wrong with this – unless the position of power is abused or used arrogantly.  If the supplier has most of the leverage, buyers must obviously recognize this, reacting either in defeat or maintaining their position of power because they are the one writing the check.  In either case, the buyer has not truly determined the best strategic course of action for the negotiation and, in the end, the result will be less than favorable for everyone.

So how can the supply chain management professional learn to strategically assess a situation and properly prepare for a vendor negotiation, without falling into the traps that I just portrayed?  The examples that I used are simple, perhaps oversimplified, but they are realistic when considering how little supply chain professionals properly prepare for negotiations.  We all have a tendency to “wing it”, and this ultimately does not serve us well.  The answer is remembering some basic tactics when negotiating so that you, the supply chain expert, can always control the situation.

3 Tactics to Make Your Supply Negotiations More Strategic

Tactic #1 – Always Prepare  

Remember what I said about “winging it”?  We are all guilty.  But properly preparing for a negotiation, no matter how large or small, will always give you the upper hand.  Here are some key things to do when preparing for a negotiation:

• Pull the obvious data.  This includes supplier spend reports, contracts, or any other documentation that you may have with an existing relationship.  Be sure to analyze it and draw some conclusions from it, while looking for any opportunity to improve upon the last contract or commercial scenario.  If it is a new supplier to you, pull their Dun and Bradstreet report, annual report from their website (if publically traded), or any other market data that is specific to the supplier or their industry.

• Pull the “not-so-obvious” data.  Take the time to research any market data for the supplier’s industry, specifically looking for trends in the market that could influence their negotiating position.  If their product or service is commodity influenced, pull the pricing indices for the last 1-3 years, as well as any market research or publications regarding future pricing trends.  This information can offer you some valuable insight during your negotiations, especially if your supplier has not prepared as thoroughly as you.

Tactic #2 – Always Take at Least 2 Minutes to Have a Proper Welcome

This tactic may sound a bit strange – and warm-fuzzy – but it’s very powerful.  Think about it for a moment…….when you begin any conversation asking how someone is, or asking about their children, vacation, or that picture on their desk, don’t you normally get a response that is warm and welcoming?  Before a negotiation, using this tactic sets a warm tone that can be very powerful during your commercial discussions.  It can prevent a negotiation from becoming adversarial and competitive, which can deadlock negotiations.  But, only spend 2 minutes – too much of a good thing can be bad.

Tactic #3 – Learn to Use and Recognize Persuasion Methods

Persuasion methods are one of my favorite tactics to use in a negotiation.  However, I must first disclose that Persuasion Methods are not my theory, nor do I own them, as I must give the credit for these tactics to Paul Steele, author of numerous business negotiation books and articles.  I had the privilege of learning about and teaching his concepts on Persuasion Methods several years ago, and I find them to be most valuable.  While I cannot adequately explain all the methods in this article, I can identify them and briefly comment on their usefulness in negotiations that I have participated in.

The Five Persuasion Methods Are:

1. Emotion

Learn to recognize the difference between emotion and emotional, and when to use emotion to control the negotiation.

2. Logic

Referencing back to Tactic #1, be prepared and use your data to your advantage.

3. Threat

If necessary, veiled threats are most effective versus outright threats, and never threaten without being prepared to follow through.

4. Bargain

Many people think of bargain and compromise as the same thing, but they are different.  Bargaining is the art of each party offering something up in the negotiation in exchange for something else.

5. Compromise

The difference between compromise and bargain is that compromising means offering a concession on your best-case deal, but the other party is not aware of it.  Thus, the point is to be prepared to enter the negotiation knowing your best-case deal, acceptable deal and worst-I-can-live-with deal.  And remember, compromise is not defined as win-win or 50/50 in terms of concessions made by both parties.

The art of negotiating is a complex topic discussed by many, yet mastered by few.  However, start your education with a focus on being prepared and choosing the best tactics, and you will mostly likely be miles ahead of your opposing party in the negotiation room.

Written by Julie Brignac, President& CEO, QuantumSix Solutions, Inc.  Julie is an accomplished consultant and professor with 20 years senior level experience in Quality and Lean Six Sigma, Supply Chain Management, Finance and Procurement.  She is also the inventor of The RoSS Model™, an end to end project benefit financial validation process that helps organizations financially reconcile their project benefits to their financial statements.  Julie is an Associate Adjunct Professor for the Undergraduate School of Supply Chain Management at the University of Maryland, as well as an Adjunct Professor of Online Learning for the Whitman Business School for Syracuse University.  She holds a degree in English and Communications from the University of Virginia, and a Master of Business Administration degree from the University of Maryland.  She is a certified Six Sigma Master Blackbelt, Lean Expert and a Certified Purchasing Manager from the Institute of Supply Management.

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