Nego%a%ng With Suppliers

The Business Case for

Negotiating With Suppliers

A common scenario:The procurement industry is full of its share of headaches, and individuals working in supply chain management are faced with challenges every day. From limited visibility beyond their Tier 1 suppliers to teams that don’t have the capabili>es to deliver on the strategy, procurement officers and teams have their work cut out for them. With today’s global supply chains, risk exists across geopoli>cal and economic disrup>ons. Procurement professionals are faced with more challenges then ever, including:

• Limited bandwidth – procurement professionals are o8en responsible for managing massive amounts of indirect spend.

• Talent gap – most organiza>ons have great talent who execute their roles well, but the problem is that roles are evolving. The tac>cal buyer might be the right individual to nego>ate with a supplier to save 5%, but are they the right person to build a rela>onship with HR stakeholders? The procurement prac>>oners of today need to be agile, break out silos, and closely align with other func>onal areas to drive the greatest value. They must build rela>onships internally, find the levers of value, and execute upon them via long-term strategic supplier partnerships.

• Declining value of cost savings – in many organiza>ons, categories have been compe>>vely sourced a handful of >mes, and consequently, delivering addi>onal cost savings becomes increasingly difficult. In certain situa>ons, organiza>ons have switched to low-cost suppliers only to become extremely unsa>sfied with the level of service they receive. A long-term struggle for procurement is how to con>nue to deliver cost savings while crea>ng a culture shi8 toward value-based measurements.

• Delivering on key metrics, such as quality and assurance of supply, inventory levels, lead >mes, and cost savings (freight, inventory levels, payment terms, lead >mes, rejec>on rates, cost avoidances, and cost of ownership)

In short, procurement teams face a challenging internal and external environment making their world very complex and certainly not easy to navigate successfully. They must navigate not only their own organiza>ons and build effec>ve internal rela>onships but also their suppliers and s>ll deliver what the organiza>on needs to grow and innovate. Given this complex environment, it raises the ques>on….

What can be done?: Introducing Nego>a>ng With Suppliers

Nego%a%ng With Suppliers (NWS) is a 2-day, highly interac>ve development program that provides par>cipants with the skills, tools, and behaviors they need to nego>ate value-based, sustainable agreements within their own organiza>ons and externally. Over the course of the program, par>cipants are taken through a series of engaging simula>ons, applica>on discussions, personal feedback repor>ng, and team exercises.

During these ac>vi>es, par>cipants are introduced to six nego>a>on principles and learn prac>cal strategies for applying these strategies to upcoming nego>a>ons. Par>cipants also build a new awareness of what their “typical” tendencies are during nego>a>ons, how these tendencies can have a nega>ve impact on nego>a>on outcomes and learn new guidelines for planning and approaching their nego>a>ons more effec>vely by prac>cing “what to do and say” to build agreements with suppliers and internal stakeholders.

Nego%a%ng With Suppliers: Key Concepts

Three-dimensional “creative-collaborative-competitive” negotiation model – which enables negotiators to look at the process as having three dimensions:- A competitive dimension in which the

parties assert their positions and set boundaries;

- A collaborative dimension in which the parties attempt to find common ground, build their relationship, and discover mutually acceptable solutions; and

- A creative dimension in which they look for ways to break an impasse and find even better solutions than those they have already explored

Principles – Six negotiation principles that form the “rules of the game” for effective negotiating. These include:1. Position your case advantageously2. Set high aspirations3. Manage information intentionally4. Know the full strength and range of your

power5. Satisfy needs over wants6. Concede according to a plan

Nego%a%ng With Suppliers: Key Concepts

The nego(a(on behaviors – which enable nego.ators to opera.onalize the three-dimensional nego.a.on model. These include:- Make Demands, which helps communicate

what you want and need from the nego.a.on;

- Ask Open Ques.ons, which helps uncover informa.on, especially about underlying needs;

- Test and Summarize, which helps clarify needs and build the rela.onship;

- Propose Condi.onally, which helps generate crea.ve solu.ons; and

- Make Trades, which helps break deadlocks and finalize agreements.

“Elegant” nego(ables– (those that have high value to the other party but low cost to your company) to break deadlocks, meet needs, and produce beLer agreements.

Nego(a(on planner– Par.cipants periodically pause during the program to document how they plan to apply what they have learned to current nego.a.ons using the RED BEAR nego.a.on planner.

Discovery learning. Par$cipants learn by doing. More than two-thirds of the program is spent in actual simula$ons, followed by structured debriefings in which skill-building needs are iden$fied and addressed.

Extensive feedback. During the program par$cipants receive personal feedback reports on their use of conten$on behaviors and verbal feedback from peers and their instructor. This feedback is obtained through the use of a Pre-Workshop Materials package consis$ng of surveys that are sent by the par$cipant to selected peers or suppliers. The surveys are returned, anonymously, to par$cipants for self-scoring.

Applica9on planning. Par$cipants periodically pause during the program to document how they plan to apply what they have learned to actual nego$a$on situa$ons.

The Learning Approach

DAY 1 – The Negotiation Principles

• Workshop Introduction

• Negotiation Simulation: Discovering

what works

• The Principles of Supplier Negotiation

• Negotiation Application Plan

• The NWS Model

• The Competitive Dimension

LUNCH BREAK (45 min)

• Concession Exercise

• Negotiation Behaviors

• Practice: Self-Interest Behaviors• Negotiation Tactics

• Negotiation Planning

• Negotiation Application Plan

• Evening Assignment: Preparation for

Morning Negotiation

DAY 2 – Rela9onship Skills

• The Supplier NegoMaMon Process

• NegoMaMon SimulaMon: The Power of Collabora7on With Suppliers

• NegoMaMon ApplicaMon Plan

LUNCH BREAK (45 min)

• The CollaboraMve Dimension

• PracMce: Rela7onship Behaviors• NegoMaMon SimulaMon: Uncovering Needs• Needs, Wants, and NegoMables• The CreaMve Dimension:

IdenMfying Low-Cost NegoMables

• NegoMaMon ApplicaMon Plan

• Workshop Summary and EvaluaMon

Nego%a%ng With Suppliers Workshop Agenda

About RED BEAR Negotiation CompanyRED BEAR Negotiation Company is a global performance improvement firm dedicated to maximizing the profitability of the agreements negotiated with customers, suppliers, partners, and colleagues. Our work helps your organization drive more competitive wins, reduce discounts, shorten sales cycles, ensure supplier quality, reduce costs, protect against margin erosion, manage risk, increase internal alignment, and support achievement of other critical corporate goals. Our proven approach helps our clients achieve desired business results, and significant improvements in human performance. Visit us at: www.redbearnegotiation.com.