Negative and contentious supplier negotiations ruining everything for you? Here’s how to negotiate in a positive and effective manner.
We’ve all been privy to supplier negotiations that have gone awry. The supplier begins to look uncomfortable. They avoid eye contact. Perhaps they even break out in a sweat, despite it being a sub-zero day. Alternatively, they get angry or perhaps they don’t say much at all, but then your relationship takes a nosedive and never recovers. They become the bane of your existence and you start wondering how the best deal could have turned into the very worst.
No one likes negative and contentious supplier negotiations, and they often are the beginning of a poor partnership (not to mention relationship!). But are they necessary? Corcentric certainly thinks they may not be, and in fact, saying goodbye to this type of negotiation is one of the big supply chain and procurement ideas we think will change everything in 2021. But how do you do it?
How to build trust in negotiations
The key to avoiding negative and contentious negotiations, says Corcentric, is to use trust-based and positive reinforcement based negotiations tactics. In order to build trust in negotiations, experts recommend six tactics:
- Speak the supplier’s language
Supplier relationships are all about fostering an environment that feels like a win-win, and an important way to establish this in a negotiation is to speak the supplier’s language. What this essentially means is that you go beyond the facts of what you are being told and profile your supplier by trying to understand the perspectives, concerns, cultural and business implications, and even the less-than-obvious messages that a supplier might be giving you.
In a nutshell, you listen a lot, and take the time to understand your supplier’s history, current business position, concerns, and even a bit about the person you are dealing with personally. A lot of this can also be industry-specific, and when learning about a supplier you also need to take into consideration industry norms and conventions, as well as industry terminology. Details that may seem small to you, include a unit of measurement (for example, a hectolitre), may be extremely significant to a supplier, so you need to be able to speak their language – literally and metaphorically. Doing so will help foster an emotional connection, and send the message that you’re committed to the supplier and the outcome, and will help build trust.
- Manage your reputation
As many of us in the global supply chain and procurement community know, the world is certainly not as big as it seems. For this reason, your supplier’s reputation isn’t the only one you need to think about.
Suppliers talk, of course, and what they say about you counts. So if you have a reputation for going hard on cost and squeezing out supplier profit, you had better believe that your supplier may already know this. Similarly, if you haven’t kept your word in a particular situation, or done something else detrimental that damaged your integrity, that supplier will have likely discovered this. In summary, if you’re known for any of these seven supplier negotiation fails, your reputation may be in trouble.
As such, always be careful of your reputation in the market.
- Create an environment of mutual dependence
Regardless of your spend, if you’re bringing a new supplier onboard, it’s clear they will depend on you to some degree. And from your perspective, that dependence is power. But have you ever thought about it from the other perspective, insomuch as you need that particular supplier?
Dependence is an uncomfortable psychological prospect, but research shows that its mutual existence does increase trust in a relationship. For this reason, try to establish the idea of mutual dependence by highlighting to your supplier the benefits of working with you and the positive mutual outcomes you’ll work towards.
There’s significant evidence that procurement has already increased trust with the C-suite this year, so now it’s time for us to do the same things with our suppliers.
- Make one-sided concessions
It’s something that many of us may feel uncomfortable with, but it is essential in gaining trust, and that is: make concessions. And not just any concessions: one-sided concessions.
In negotiations, it’s difficult to not think that you, as the buying organisation, should have the upper hand. But in reality, what you are building is a long-term relationship in which you should be less focused on tit-for-tat concessions, and more on good outcomes. Before you concede, ensure that your organisation doesn’t suffer as a result, but you’d be amazed at what a single concession can do for trust in negotiations (and beyond).
- Point out your concessions
Cringing at the idea of conceding? You might not like this news, but it’s a necessary evil. If you’re going to go to the trouble of conceding, you need to ensure that you deliberately point out what you have done.
Why? Because pointing out your concession, including exactly how much you have given away and what that sacrifice will mean for your business (and hopefully, not just for your ego), shows that you are serious about looking after your supplier. Fortunately, doing this should also trigger their desire to look after you, further engendering trust.
- Explain your reasoning
Unfortunately, humans are simply not that trusting, especially in a situation which can be perceived as conflict, like a negotiation. For this reason, your supplier may assume the worst of you (and you the worst of them), before conversations have even begun.
That’s why, when negotiating, it’s important to explain your reasoning for any demands you make. For example, say you require a certain percentage discount on volume orders. Instead of simply asking for this, explain that you need it to make your manufacturing feasible. Understanding your drivers will help give your supplier better insights into your business and how they might be able to help you.
There is another, all-encompassing reason that we all need to avoid negative supplier negotiations. Discover what it is here, as well as many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.