Without the market transparency that these platforms provide, this is how your people find their bargains:
… and why you have an inventory of unsaleable product!
Category Archives: Negotiations
Will Apple Save You More on Print and Marketing than Negotiation Ever Will?
As I mentioned in my recent post on how marketing is a huge savings opportunity, last year, the Marketing Supply Chain Institute released “Define Where to Streamline: Making Marketing Supply Chains More Efficient, Agile, and Enviro-Friendly” (registration required) that noted that, with good visibility, an average marketing organization can easily find 20% to 25% savings with Procurement’s help.
About ten pages in, the report lists the top five areas where the marketing supply chains could realize sustainability gains (which are the ultimate key to long term savings). These are:
- print, production, warehousing, and delivery
- transportation and logistics (of material)
- packaging and material
- meetings, user conferences, & events
- merchandising & point-of-sale displays
And they all have one thing in common: printed paper. First you print the fliers and brochures and inserts and then you transport them to your facilities and events and points of sale for distribution and use. If you could reduce your paper costs, which aren’t ever going to go down as wood becomes more precious, and printing costs, which are going to stay as high as the price of ink, you could substantially increase your savings.
Thanks to Apple, and the iPod, iPhone, and iPad madness, you can now do just that! 3 Million iPads in less than eighty days, and sales are still going strong. Pre-orders for the iPhone 4 racked up to 600,000 units so fast that the providers had to stop taking them. And there are over thirty million iPod Touches in the wild already. (With many more on their way now that Apple has a promotion that students get a free one with a new Mac.)
Thanks to Apple, the paperless world of ST:TNG is almost here and it won’t be long before everyone has their own personal electronic pad (be it an iPhone, an iPod touch, or, more likely, an iPad). And if you take advantage of it (like other early adopters), you will save a fortune in the long run. (Many conferences have already put their schedules and proceedings on Apple’s iPlatform, including the 2010 International Builders’ Show, Social Media Week Toronto, and the GameHorizon Conference 2010.) If you’re an organizer, you can choose to go i and dictate no printed materials. If it’s a large conference, you can negotiate with Apple for an “educational” discount and anyone who doesn’t already have an iMobile can have the price of one included in their conference fees.
But events aren’t the only opportunity for saving on printed paper — the boardroom is another great opportunity. How many bales of paper does your organization print out each day, only to see it used for a single meeting before it goes to the shredder? Considering that the average employee in the US uses 10,000 sheets of printer & copy paper every year, if we take an average blended per-sheet cost of just 5 cents, that says that your average employee is using at least $500 worth of paper each year. If we’re talking executives and predominantly colour print-outs, we’re looking at a minimum of $1,000 worth of paper each year. A 16 GB WI-FI iPad, which will hold all the documents they need at one time, is $499 (+ $99 for 2 years of Apple Care). If you institute a zero-printing policy for the boardroom (and meeting rooms), and buy a stack of corporate iPads that can be quickly loaded with whatever documents are needed for the meeting, you can reduce your internal printing costs by at least 50% (as there will be no costs in year two), even assuming you always upgrade every two years when AppleCare runs out. (Many of the devices will probably last three or four years, considering Apple’s track record of quality hardware, so you can sell the old devices at this time and recover some green if you wish. Or you can be a good corporate citizen and, after having the batteries refurbished, donate them to a needy school!)
Think about it. Paper + Ink + Printers + Energy to Print + Transportation + Shredding & Recycling is costly. e-Printing is almost free, as it’s just the cost of the e-Reader, which is much more energy efficient than a printer!
You Can Get More By Getting Mad … If You Don’t Let It Cloud Your Judgment
A recent research summary over on Strategy + Business, which summarized a recent study at UC Berkeley, noted that you can get more by getting mad, as it lets the other party know that the deal could fall through. If the other party wants the deal, this could cause the other party to rethink the terms of the offer and come back with a better deal for you that pays more attention to your demands. However, it can also backfire because if the other party doesn’t want the deal that bad, or if the other party thinks you’re only being angry as a ploy to get a better deal (when you aren’t really angry), it could cause the other party to walk away.
In other words, it’s a tool in your toolkit, but not the centre-point of a strategy that should rely on fact-based total cost negotiations. Who cares if you save an extra 5% on unit price if the logistics costs will cripple you in the end as global freight prices rise again?
Price is Only ONE Component of Cost
A good reminder of this is Jim Anderson’s recent piece on The Total Cost Approach for Dealing with Unmovable Prices over on The Accidental Negotiator. As Jim notes, the purchase price of an item is not really the true price that we’re going to end up paying for it. There are lots of additional costs, fees, and services that go along with it. Ultimately it’s the total cost of what we’re going to end up paying that really counts, not just the initial purchase price. So if the seller won’t move on unit price, focus the negotiations on another cost component.
As Jim notes, if you’re buying fleet vehicles, negotiate on service costs, warranties, financing, etc. Decent (extended) warranties can easily run you over a thousand per vehicle, and if the vehicle is made well, this is all profit for the manufacturer (as the warranty will expire before something major goes wrong). Here’s an easy few hundred (or more) per vehicle with very little effort. Plus, your average vehicle will need (at least) a few thousand dollars of regular services over the first 60K miles / 100K kilometers, most of which is profit at high hourly service rates. If you’re buying in bulk, you can easily save thousands by negotiating a significantly lower hourly rate. And then financing could run you ten thousand or more per vehicle. Knocking a few percentage points off the rate can save you a small fortune.
If you look at the total cost, it’s often easy to negotiate quite a few percentage points away when you move away from the “fixed price” to the variable total cost components, some of which will be high margin (with lots of negotiating room). Especially since the seller will generally want your business and move where she has wiggle room.
Running a Successful Meeting
As a supply chain professional, you’re probably in lots of meetings. Lots and lots of meetings. In fact, you’re probably in meetings all day multiple days a week. And many of these meetings are most likely a complete and utter waste of time. Why? Because, unfortunately, many people don’t know how to plan and execute a good meeting. That’s why I was glad to see this recent article in the McKinsey Quarterly on “Taking the Bias Out of Meetings” that had some great tips for planning and running an effective meeting. (It purported to help you take the bias out of meetings, but considering that the bias usually comes from the participants, that’s easier to say then do when you can’t just exclude the biased participants and usually have to deal with them one-on-one to get them to see past their biases. Nevertheless, from a meeting perspective, the tips were very good.)
The articled proffered the following five tips:
- Make Sure the Right People are InvolvedEveryone who has to be there must be there and anyone who does not need to be there shouldn’t be. This is even more important than ensuring a diversity of backgrounds, roles, risk aversion profiles, and interests. Failing to recognize this simple fact will either waste someone’s time (if someone is there who shouldn’t be) or waste everyone’s time (as you won’t be able to go forward if the key decision makers aren’t present).
- Assign HomeworkEveryone should come to the meeting prepared. Everyone should already have read the background materials and come prepared with the input they are expected to provide. Otherwise, everyone’s time is wasted.
- Create the Right AtmosphereEveryone should be encouraged to participate and asked to speak up by the moderator. Remember, everyone is there because they have something to offer. If they keep it to themselves, you are, again, wasting everyone’s time. (Plus, they might have the key piece of insight that can help you get past damaging biases.)
- Manage the DebateMake sure that everyone stays on topic, that the discussion does not disintegrate to juvenile heated arguments between two key proponents who have already made all of their valid points, and that consensus / majority decisions are made in a timely manner.
- Follow-UpThe end result of a successful meeting should be an action plan with action items for each attendee. Follow up to make sure the attendees are executing on their action items in a timely manner.
I’d also offer up the following tips:
- Run the meeting against a complete agenda with a timeline.This valuable tool helps you avoid tangential (and inconsequential) discussions and keeps the meeting focusses, as one of the keys to the success of any effort is a deadline. (Just ask Richard St. John.)
- Don’t go in with an end-decision in mind.Otherwise, you’re putting bias into the meeting that could prevent you, and others, with stumbling upon a much better decision through collaboration.