Advices for Good Negotiations with Suppliers
Negotiate everything in life, from your diving suit to your wages, from the new car to the flea market shirt... In application to your suppliers you can practice the technics with lower profile suppliers and improve them in big spent suppliers.
There is no negotiation if there is no deal.
Know your own limits and how much you can give in. I remember perfectly how I failed negotiating a last-minute room in a rural hotel. They did not give in price, and we both lost. They lost a customer forever and probably did not recover a room at 08:30 p.m. Saturday evening, but I also lost since I had to drive 80 km. back to town. So there must be always a mutual agreement and be ready to give in sometimes for achieving your targets. In my opinion, people who never give in achieve short time targets only, and have more difficulties in building long-term relationship in negotiations (which is sometimes also positive to achieve longer targets). In terms of suppliers make your own target dates to certain agreements and monitor evolution of the negotiations. And make sure you update your strategy constantly with the market and your own company evolution.
Never start a negotiation without a preparation.
I learnt a lot from the Dutch about working with “facts and figures” since one needs to know the data, how much margin, how much purchasing volume, how big is your negotiator, in which situation you are (weak or strong) in terms of power of negotiation… and then:
Follow your preparation with a good strategy. Set up your own targets, and then benchmark them with your own reality and see if they are realistic. A simple example, if you want to buy your car to 20,000 euros netto when it is worth 40,000 euros brutto without discounts. I can give you recommendations on how to reduce the price but realistic target would be around 30,000. And most important within this value, set up a range, like for example +/- 2,000 euros, that you can accept.
Negotiating is being flexible.
If you work with purchasing volumes, you might be influenced by market, material prices evolutions, etc. Making a strategy for example is to focus in material compensations with negotiating extras, concentrating in sourcing from certain best price countries, by changing volumes. But you must bring your strategy to a lower level in a practical way, which suppliers change or introduce and which time of the year based on which assumptions.
Use a tactic (but applicable to your interlocutor).
There are millions of negotiation tactics, but not all are applicable to the person in front of you, you need to know the background of the person, cultural, company profile, history from past negotiations, and most difficult during the negotiation catch up with behavioral facts that allow you to understand the other person tactic. That is the funniest part of a negotiation is what I call the “theatre”, like for example play a role that give one impression when the target is achieving the opposite. With suppliers I think it is important not to strictly stick to one contact person depending on the company hierarchy and decision level. Many companies know that and also the possible empathy with the customer and have rotation of sales executives to be more aggressive with the customer. Be careful with your negotiation schedule, starting from zero can be hard sometimes.
In Business it is very usual that in a negotiation with a supplier about price decreases, supplier might come up with unpaid invoices or directly complain about stretched cost target that create a difficulty in this current negotiation. It is requested as much empathy as possible: only by understanding your opponent you can deal with them. Back to tactics, there are some basic tactics to move forward in negotiations in these situations. But again spend time to listen to your interlocutor.
Listen before fighting.
Keep mental agility in order to avoid forgetting your topics, your poker-card or your argumentation, while listening carefully the story of your interlocutor and his/her argumentation. Listen but do not forget what you wanted to say. Not only people take it very bad the lack of education of interrupting people but also it might force you to show more aggressivity to interrupt and the opponent might take it as a defense/aggressive tactic and difficult any of your moves. Latin countries are good in interruption of conversation; this can be also positive in case of blocking points of discussion or making it more dynamic. Control the times of the negotiation while keep firm and determined intentions (for this I admire a lot Muslim people in negotiations).
Respect the cultural differences from your interlocutor.
It is not the same in business to discuss in Asia, Africa, USA, Middle East, North to South Europe or Turkey. Show respect during introductions, to presentation of the companies, or even their own methods of negotiation. Take some time to analyze their behaviors in the negotiation. But an important point, do not try to negotiate with locals in the local way, they might have done it for years and you are just a newcomer. There is a high risk to lose the battle, so do not reinvent the wheel, make your own wheel adaptation. Use your own tactics and negotiation approach.
Make a good argumentation and debate as much as you can, debate, explain, discuss, show motivation to the topic…. and then be ready to summarize it in the least unexpected moment. This requires a lot of mental gaming, you can also take notes of progress done in discussions and when the moment comes then summarize the negotiation. Summary of agreement is key in long negotiations.
Only by being yourself, the others will feel empathy for you which is an important point in negotiations and business in general. Therefore, with it you would be able to apply your negotiation approach and tactic, for example I change topic during negotiations in difficult moments keeping in mind the difficult point and bring it back when unexpected with a different argumentation; but just because I am really good on it. I show more respect to other tactics which I am not familiar with.
Negotiation in sourcing is 50% individual own skills and 50% learning by doing, by participating in negotiations by reading books and also by trainings. The more you live the more you learn.
And, finally learning from other cultures. In Europe we think we know a lot about negotiations, but my best teachers were clients from Muslim countries.
Good Luck! And always remember that there is no negotiation without a good deal.