How To Influence A Negotiation Early, Part I
PurchTips edition #173
By Charles Dominick, SPSM, SPSM2, SPSM3
When Does Negotiation Influence Begin?
Waiting for a negotiation to start to begin exerting your influence may be waiting too long. There are three methods of influencing negotiation outcomes early.
Method A - Prevent Backdoor Selling
A timeless negotiation principle is that the less certainty of earning your business that a supplier has, the more leverage you'll have. So, it is important that for large purchases, you maximize your leverage by ensuring that suppliers - no matter how hard they probe - do not get clues that their proposals are acceptable. While purchasing professionals are usually adept at maintaining uncertainty, internal customers are not.
Therefore, the purchasing department should be the first entity in your organization to contact suppliers when a purchase cost is expected to exceed a certain amount. And if someone argues that the cost can't be known without contacting suppliers, then the purchasing department should be consulted when it's reasonable to believe that the purchase might approach the limit.
Method B - Get Involved In Product Design
One of the toughest negotiation scenarios is a sole source situation, where there is only one supplier who can provide a product/service. Sadly, most sole source situations are self-inflicted by buying organizations who engage suppliers in their product design process without purchasing department involvement. Those suppliers creatively lock themselves into long-term business characterized by large annual price increases.
The solution is having a purchasing professional on every design team. This person must ensure that future supplier competition is considered and part/material standardization is encouraged in design decisions.
Getting the purchasing department involved in design can be tough in many organizations. It requires top management support. To get that support, show how sole source situations have resulted in continual cost increases for previously designed products.
The next edition of PurchTips will introduce the third method of influencing a negotiation early.
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