Everyone is still talking about the recent Japan earthquake and the ramifications it will have on your supply chain for weeks, months, and years to come. No one is talking about the fact that, thanks to global warming, forest fire season is now upon as and that more than 30 wildfires raged through Oklahoma last weekend (Source) and that it only takes one fire to destroy a plant or distribution centre.
But it doesn’t take a natural disaster or a political uprising (such as the recent ones in Egypt and Libya) to instantly shut down your supply chain. A simple regulatory decision can have ripple effects through your supply chain. On March 10, the US Transport Security Administration (TSA) issued an emergency amendment to security measures that would take effect immediately that required freight forwarders with air cargo operations at non US locations to request additional information for all shipments on each master airwaybill ( MAWB ). As a result, Air Canada had to embargo all cargo flown to the US until further notice until they could be sure they were in compliance. (Source) Now, this embargo only lasted a day, but it could have lasted a week had the regulatory change been more onerous. But like a natural disaster, this disruption came without warning to shippers who relied on Air Canada to deliver their goods to the US.
That’s why you need contingency plans drawn up and ready to go, because you never know when you will need them.
I recently pointed my readers to Stephen Guth’s Contract Negotiation Handbook that exposes 16 of your dirty tricks which they hopefully won’t fall for again once they read the book and absorb its secrets. As a result, you’re going to have to make some concessions. But what ones should you make?
In order to show you that SI doesn’t play favourites (and is only interested in a fair and level playing field), I’m going to give you five examples where the buyer is right and where you should concede, inspired by this recent article over on MintLife that asks is the customer always right?.
- When it Costs Nothing To Let The Buyer Have Her Way
Maybe she wants her paper, free training materials, or faster delivery. If the T’s & C’s she wants have no negative impact on your revenue, if you have e-versions of the materials that can be downloaded from your FTP server, or the buyer is paying for delivery, who cares? Concede. And maybe when the buyer feels like she’s getting her share of compromises, she will back off of some issues that are a lot more costly to you.
- When the Law is on the Buyer’s Side
If you screwed up on a previous contract, and the buyer is asking for fair restitution (in the form of going forward discounts), and the law backs her up, you better concede this point quick before legal gets involved. Because any savings you negotiate then will be eaten up ten times over by legal fees.
- When Your Delivery Team Has Been Negligent in the Past
Even if its questionable as to whether the buyer would win in court, if your team didn’t deliver on past promises, own up and make it right. This will instill a great deal of respect for you in the buyer, remove hostility, and considerably ease negotiations.
- When The Company Can’t Afford to Lose the Business
If the customer is one of the company’s top customers, and accounts for a double digit percentage of revenues, even if the customer doesn’t know it, be prepared to make a few concessions. Losing a few profit points is much better than losing profitability as a business. However, this is one concession that should not be made too quickly.
- If failing to concede would bring shame to you or your department if the buyer brings the complaint to the organization’s C-Suite
Let’s say you got caught trying to pull the GSA or SOX ploy or, even worse, making a claim that no one pays less than X when another customer made it public they got a great deal from you and paid only 90% of X. You may have been following the internal negotiations playbook, but it doesn’t matter now, because shame on you or the department could be much worse than failing to reel in a big fish. (After all, there are plenty more fish in the sea.) Immediately concede the lie, and if it requires an immediate price drop to the lowest known price, concede that too (with appropriate volume or contract term conditions if the price was granted only because a volume threshold was reached).
While there’s a sucker born every minute, not every potential customer will employ the sucker. So while the followers might employ a sucker you can real in with one of your ploys, there are leaders (who read SI) who won’t fall for them, or stand for any less than what was promised. Remember this, and you’ll get a fair deal from the leaders (who understand that a fair level of profitability is key to sustainability) and survive in your job long enough to reel in the next follower (who employs a sucker) that comes your way.