How do two parties with opposing needs and desired outcomes come to an agreement that allows both to walk away satisfied? Enter the art of procurement negotiation strategies. Successful negotiations are not a win-lose proposition. The best negotiations result in a win for all parties, which leads to stronger relationships and a desire to continue a partnership which is mutually beneficial.
During the procurement process, a negotiation between corporate buyers and sellers is the first step in developing a supply contract which has a direct effect on profit or loss. As a Procurement Director, you are intimately familiar with the pressure placed on you to negotiate a successful deal on behalf of your firm. Sourcing technology has made the groundwork for such negotiations easier by providing the data and information you need to enter into negotiations prepared, but what about the personal skills and experience you need to get the job done?
In a Florida State University study titled A Skills-Based Analysis of the World-Class Purchaser, Larry C. Giunpiero, Ph.D., found that negotiation skills were crucial in achieving an organization’s goals of improved quality, price delivery, and service. A procurement director who has mastered the art of negotiations is able to collaborate and creatively develop negotiation plans, strategies, and actions which result in strong but fair negotiations. The ability to develop alternate plans which result in mutually beneficial outcomes is a highly desired skill among procurement directors and is highly sought after in procurement job candidates.
In a situation where the stakes are high for both parties, an adversarial relationship is often the default position. However, many procurement directors today are leaning toward a more relational approach. It can be argued that access to data and information in the sourcing process allows for more transparency. A poker face and stereotypical negotiation tactics aren’t going to work any longer. To achieve a high success rate, several negotiations skills are required.
Procurement Negotiation Skills Every Director Must Have
Excellent Communication Skills
As a negotiator, your role involves influencing and persuading others to agree to your terms. You cannot negotiate favorable supply contracts on behalf of your firm if you are not a good communicator. You must have the ability to effectively communicate the needs of your company to your suppliers. Keep in mind that you are the bridge between your company and its suppliers and therefore, you need to maintain a steadfast communication link.
Great communication involves effective listening as well as speaking. Watch for clues and opportunities during the other party’s presentation and use those points in your negotiation. What are the other party’s needs? If you can help meet their needs while satisfying your own party’s needs, you’re on your way to a successful deal.
A procurement director who is true to his word and reliable will develop a reputation as a fair negotiator. When negotiating, you must do whatever you promise, and follow up on the promises made to suppliers. This will help boost your company’s reputation and will make it easier for you to negotiate future contracts and deals.
Integrity in negotiations also implies consistency, which will make you more valuable to not only your company but also at the negotiation table. Your bosses and your company’s suppliers will know that they can always count on you to deliver on your word.
Research and Preparedness
Every successful supply chain professional out there will tell you that research skills form an integral part of your success in negotiations. Every deal will begin with preparation and research to gather valuable information about your suppliers even before you sit at the negotiation table. Here’s where analytical skills and data from sourcing software become an integral part of your supply management process. You will have information on cost, price, delivery times and service response times before you meet with suppliers. Armed with this information, you will be prepared to leverage the data to negotiate the best deal for your firm.
You are likely to be accompanied by several other employees from your firm when negotiating a supply contract. As a procurement director, leadership is one of the most valuable negotiation skills you can have. You will lead your team to success and it is your responsibility to assemble a strong negotiating team that has the right players. Ideally, these individuals should be amply prepared for the negotiation and have the training and experience to help win the deal.
Non-Verbal Communication Skills
At the negotiation table, certain information cannot be passed verbally to members of your team due to its sensitivity. Non-verbal communication skills are an important asset to a procurement director during negotiations. Such skills enable your team members to communicate with each other about when it is the right time to stop talking, and even when to change the topic under discussion.
Failure to have non-verbal communication skills when negotiating raises the risk of your weaknesses getting aired before the other team. This is also a sign of confusion, which the other team may use to gain an upper hand during the negotiation.
Procurement is about having a solid analytical and creative understanding of market factors such as cost drivers, demand, supply, and value potential. Creativity is a negotiation skill that enables you to come up with pragmatic alternatives and approaches, which benefit both your firm and the supplier. This is a potent weapon when negotiating since it also enables you to maintain momentum and clarity. Creativity will similarly give you a unique ability to apply your skills while translating them into effective and responsive procurement solutions.
Negotiations form an integral part of the procurement process. Procurement directors who use effective communication, leadership, creativity and analytical skills to influence, persuade, and explore alternatives will have the best outcome. The result will be lasting supplier relationships built on trust and integrity.
ProcurePort can help your organization negotiate more effectively and generate cost savings through our e-Sourcing technology. Having the data you need is crucial to effectively negotiating with suppliers. ProcurePort’s cloud-based e-Sourcing software and contract management platform simplify the supplier management process. Contact us for a consultation to see how we can help you generate cost savings through our e-Sourcing solutions.