Last week, RED BEAR was on the ground at ISM World 2024 in Las Vegas for the Institute for Supply Management’s annual event. RED BEAR Senior Instructor Shawn Malone was also a featured speaker, delivering a session titled, “Six Negotiation Strategies to Mitigate Procurement Challenges and Risks.”
ISM World 2024 focused on reimagining the future of supply chain and procurement — a topic we’re no stranger to here at RED BEAR. As Shawn recently noted in ISM’s Inside Supply Management cover story for the March/April 2024 issue, The New Tools and Rules of Negotiation, learning to adapt and find balance is critical to negotiation success post-COVID.
Building on this idea, Shawn’s session delivered actionable negotiation strategies to combat inflation concerns, build supply chain resilience, and mitigate pressure from geopolitical events and natural disasters.
RED BEAR at ISM World: Six Negotiation Strategies to Mitigate Procurement Challenges and Risks
With a long track record of training procurement professionals to be the best they can be, Shawn shared six actionable strategies, principles, and behaviors that drive value in procurement negotiation.
As Shawn shared in his presentation, today’s negotiators must focus on:
- Embracing healthy tension
- Setting high aspirations
- Focusing on your strengths
- Uncovering the needs of the other side
- Discovering creative solutions
- Conceding according to plan
While these strategies can help tackle common negotiation challenges, they’re more important than ever to crafting win-win deals, building strong supplier agreements, and withstanding supply chain challenges.
The Road Ahead: Top 4 Takeaways from ISM World 2024
While Shawn and the RED BEAR team were at ISM World 2024, we couldn’t miss the chance to connect with over 2,000 supply chain professionals and glean insights into what procurement teams will face in the coming year.
Here are RED BEAR’s top takeaways from ISM World 2024 and how Shawn’s insights can help procurement professionals prepare for the year ahead and procurement challenges to come.
#1: Persistent Inflation Continues to Be… Persistent
Whether at ISM World or at the numerous RED BEAR workshops conducted over the last year, one thing is clear: inflation continues to be a top concern across the board.
Procurement leaders can no longer afford to do nothing. Instead, organizations should set a clear strategy and negotiation plan in place for each supplier. Whether single or multi-supplier, it’s important to know your organization’s power and embrace tension during tough conversations. And in the cases where price is fixed, negotiate for added value that supports your organization’s other top goals and business objectives.
#2: Supplier Diversity and Resiliency is Business Critical to Managing Risk
Like inflation, many of our clients and friends at ISM World voice the same concerns about single-supplier challenges.
Supplier diverisity doesn’t happen by accident. It requires intentional planning and extensive efforts to build relationships that meet the needs of your procurement team. Procurement teams cannot bury their heads in the sand anymore. With inflation, ongoing natural disasters, and widespread geopolitical conflicts, change is now the only constant that procurement teams can account for.
As Shawn recently noted on The Confident Negotiator Podcast, “Suppliers are holding onto price. [Procurement teams] still have these single- or sole-source suppliers, so they feel like they have no leverage, they have limited time to plan and limited time to negotiate. So that is a big challenge for them. Even internally, there's a lot of resistance to change suppliers, so that holds their hands from other options.”
Supplier diversity certainly helps mitigate supply chain risk. It’s also effective in strengthening your negotiation position with all your suppliers.
Be careful to approach supplier diversity with the goal of building positive relationships, though. When supply chains are crunched, win-win agreements are important no matter how many suppliers you have.
#3: The Challenges and Opportunities of AI Across the Supply Chain
Undoubtedly top of everyone’s mind is how supply chain organizations should prepare, adopt, and manage artificial intelligence.
Organizational AI Governance Policies are crucial, but understanding the limitations of revolutionary technology like Generative AI is just as critical. To do this right, procurement negotiators need to understand the benefits and limitations of GenAI in procurement negotiations.
Any skilled negotiator can tell you that the emotional intelligence and training needed for strategies like knowing your own negotiating power, embracing tension, and uncovering the hidden needs of your counterpart can’t be replicated by technology.
But what can?
Procurement teams should look at workflows that improve productivity. Think inventory management, negotiations research and planning, knowledge management, content creation, and sentiment analysis of supplier calls.
Let GenAI do what GenAI is good at. Let humans focus on driving strategies that deliver value.
#4: Customer Service Shouldn’t Be an Afterthought
Customer service is one of the priorities we advise our clients to consider when we talk about avoiding the trap of focusing solely on price in negotiations.
Service levels have been on a sharp decline since the COVID-19 Pandemic. Until procurement professionals take the reins back, they’ll continue to receive increasingly poor service.
As part of the negotiation planning process, procurement teams must make note of what levels of service they want, what they expect, and what they need for a succesful, long-term supplier relationship. These demands should be included in the negotiation process and outlined in any signed contract with a Service Level Agreement (SLA).
Negotiation Training is the Key to Getting Ahead
This year, ISM World highlighted the many challenges facing supply chain-intense organizations in the coming year. At the same time, optimism is returning with many attendees and speakers highlighting the areas of opportunity supply chain, sourcing, and procurement professionals, teams, and operations should take advantage of in the coming months.
As Shawn notes, “Seasoned negotiators know that perfecting their skills comes with training and practice. Just like any fitness training, you can’t just read about it – you have to get out there and practice and you have to practice doing it right.”
To learn more about RED BEAR’s procurement negotiation methods and training, contact our team today.
