A recent article in eSide Supply Management on Negotiating for Mutual Benefit which outlined seven tried-and-true strategies for your organization to get more of what you both want from procurement negotiations had a number of tips that should not be forgotten if the goal is mutual benefit.
Survey the Landscape and Share the Wealth
Don’t limit purchases to nearby suppliers as suppliers in other geographies might bring additional benefits. Plus, if the number of suppliers is limited, spreading business among multiple suppliers can help to ensure their financial security and maintain a competitive market.
Negotiate for cooperation using the rules of “smartnership”
Don’t use win/lose tactics. Confrontation is not likely to elicit the collaboration and trust necessary for success. Instead, work with the supplier’s negotiating team to come up with a win/win scenario that the supplier will be incentivized to deliver on.
Insist that your supplier make a decent profit
A supplier that does not make a decent profit will not stay in business. It doesn’t matter how great the deal is if the supplier does not stay in business long enough to deliver. Plus, a buyer who insure’s a supplier’s financial success is likely to become a preferred customer, and this can deliver benefits for years to come.
In other words, the best results come from ensuring that your success is your supplier’s success.
First of all, let me apologize for taking so long to write Part II. I never expected such an overwhelmingly positive response to my previous posts, and it went to my head, and like a writer who wins a National Book Critics Circle Award for their first novel, I developed a severe case of writer’s block because the last thing I want to do is disappoint you. But thanks to some prodding, and the realization that I don’t have to tackle it all at once, I was able to capture three more life lessons that I learned in clown college that I’m sure will help you in your Procurement Career.
- Learn to Barter (because it’s all funny money in the end)
Not all purchases should involve exchanges of currency for goods or services. When possible, and especially when the deal is with a strategic supplier or partner, an exchange of goods or services should be considered. For example, if you’re a temporary labor placement agency buying software from a foreign IT company that needs temporary labor in your home country, consider an exchange of services in lieu of paying for support or future upgrades. Not only will this reduce cash-flow requirements in a tight economy, but it protects you from currency exchange risks in countries with unstable currencies undergoing fairly rapid inflation or deflation.
- Be Cognizant of the Risks
Those of you who don’t might end up without a job just like Fred ended up without a head. I didn’t know No-Head Fred, but, thanks to him, my entire class knew why you didn’t stick your head in the mouth of a hungry lion who didn’t like you. Fred didn’t understand that a lion could bite your head off and, as a result, didn’t insure that the lion was fed before performing the stick-your-head-in-the-lion’s-mouth trick. However, since the rest of us understood the risk, we always insured that the lion was fed and happy before performing the trick, and we all kept our head. Now that trade is truly global, this is one of the most important lessons for a Procurement Professional. If you’re not cognizant of the risks, you’ll never know when you might lose an entire shipment, or, if you’re not careful, your life. While a short-cut off the coast of Somalia in a shipment from Mumbai to Adan (for example) might seem like a good idea at the time, it won’t seem like such a good idea when Pirates are boarding you. North of Seoul might be the last place you want to build a new plant if North Korea declares war on South Korea. I know the risks aren’t always this big, but they can be, and if you’re not cognizant of them (and do not take the necessary precautions), you could lose your head over them.
- Don’t Be Afraid to Laugh at Yourself
Just like the situation gets a little tense in the dressing room when you have a poorly-timed wardrobe malfunction, negotiations in challenging economic times can get so dire that you couldn’t even cut the tension with a knife. In these situations, the only way to break the tension-ice is with a good hearty laugh, but no one is going to laugh unless you laugh at yourself first. In the first situation, the only thing you can do is look down and let out the heartiest laugh you can. In the second, you’ll have to make a slip of the tongue that’s so funny that you can’t help but laugh heartily at yourself. For example, if you were buying ball bearings and you accidentally called them bears’ balls, I’m sure laughter would break out.
I hope you enjoyed these life lessons. Until next time, please join me and eleven of my friends as we take a ride in our clown car.
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