Supply Agreement Negotiation

If you are the main customer of a small supplier, your influence in the negotiations can be considerable. But pedal carefully – if you push too far, you can undermine his goodwill, which could damage the service you receive. There is also a risk that they will abandon the product you need, or even leave the company. Negotiations with suppliers are an important part of any procurement role; And it can also be the hardest. In the coming weeks, we will publish a small series of blogs on supplier negotiations, from an introduction to the process to expert advice to improve negotiations. Negotiation can be an emotional exercise, the pressure of the result creating an environment of conflict and suspicion, both inside and outside the company. These emotions are not limited to the usual dustings of buyers and suppliers, but also to internal judgments and misunderstandings, because the importance of the supply chain is more important. Avoid positioning, bluffing, lying or deceit. These are tactics of yesteryear. Be yourself, respect your personal and organizational values and proudly represent your business. Trust is an underestimated professional and personal attribute.

Win it and hold it. The purchase of high-cost items or services requires extensive negotiations to reach a final contract. The change has occurred for a variety of reasons that may be at stake in a particular sector. In some cases, suppliers have eliminated their competitors by reducing costs or developing disruptive technologies. In other countries, the rapid increase in demand for inputs has exceeded supply so much that suppliers have been able to reload what they want. In other countries, demand is consolidating demand and supplier prices are so low that many suppliers have left the market, giving more influence to the other few. Identify conflicts of interest and eliminate them. For each person concerned, know their priorities, preferences and loyalties. Everyone has their own “hot buttons” and prejudices. Nor should they underestimate the impact of linguistic and cultural differences. Many well-planned negotiations fail because of personality conflicts and misunderstandings, not because of large differences in business position or desired outcome.

So how can your company maximize the efficiency of your negotiations? Here are four factors that we consider extremely important. Suppose your company theoretically negotiated the best possible discount and, for example, 70% of your purchases are under contract. (You`re way ahead in this hypothetical game!) Do you keep an eye on purchases to make sure you`re actually getting those hard-earned discounts? Most companies do not have time to monitor this important and often overlooked step. While this is not really part of the negotiation process, all your discussions are nothing if suppliers do not respect your agreed prices. But remember that if you lower the price – perhaps by threatening to get away from the negotiations – you will end up having a bad deal. The provider may have to cut costs elsewhere – in an area such as customer service, which could be costly for you in the long run. One of the most important factors in skillful contract negotiations is to get the most significant discounts possible. If you own a building, it not only reduces your costs, but also increases the market value of your building.

If you are a property manager, not only will these savings delight the building owner, but some of these savings can be passed on to tenants or residents. Negotiate to reach agreement on the terms and delivery elements of the contract. The goal of a fair and lasting agreement that improves relations between the two parties. The key is to determine their preferred outcome. But stay realistic – if you`re not willing to compromise, the negotiations won`t go far.