No business is an island – especially in a world of global supplier networks and transnational partnerships. What’s more, companies are increasingly outsourcing roles and functions previously considered core to a business: managers, marketers, and even certain C-suite positions.
This changing business context demands a new way of thinking about supplier negotiation; one that champions long-term strategic partnerships and strong relationships built on trust and respect. This is because the traditional approach is not only old fashioned – it can be downright damaging.
Let’s explore this in a bit more detail.
What does traditional supplier negotiation look like?
For decades (and likely even centuries) purchasing professionals have taken an adversarial approach when negotiating with their suppliers. “You have something that I want, and I need to get it from you by any means necessary.” The supplier is the troll under the bridge that needs vanquishing so that you can take your organization onward to greener pastures.
This locking of horns defines the entire relationship along competitive lines, where you’re both aiming to “one up” the other. Whatever the outcome, someone will always benefit at the other’s expense.
Buyers who take this approach tend to follow a predictable process. They receive orders from internal stakeholders, identify a list of potential vendors, and then pit those suppliers against each other in a Battle Royale-style race to the bottom – ultimately going with whoever offers the lowest price.
But here’s the problem: not only does this create a hostile and dehumanizing environment for suppliers, it forces them to compete on price and price alone. This fails to account for any number of other factors that can often prove far more consequential than a dollar figure: logistics, delivery, data exchange, communication, transparency – you name it.
Redefining supplier negotiation
So how should a company negotiate with their suppliers? Well, instead of treating the situation as win–lose by default, the goal should be a clear and mutually agreeable win–win. This new approach should emphasize profitability as well as supplier relationships.
Today’s best negotiators don’t view their suppliers as adversaries, but strategic partners. These negotiators see continued success because they focus on all aspects in their discussion, including non-financial factors. This all but ensures a far better outcome for all internal stakeholders, as their deeper needs are less likely to be left by the wayside in favor of a lower price.
Strategically effective purchasing professionals also put the effort in to identify a small number of potential vendors that are best-suited for long-term partnership and collaboration, and that can offer value beyond the lowest price.
RED BEAR Negotiation Company is a global performance improvement firm dedicated to maximizing the profitability of the agreements negotiated with suppliers, customers, partners, and colleagues. If you’re interested in enhancing the performance of negotiators and purchasing professionals in your organization, contact us or click here for more information.