Posted 24th Jul
Following on from our previous blog on how buyers identify their own interests in procurement negotiations , we now turn to understanding our suppliers’ interests.
Sometimes, what the supplier is interested in is of little interest to us; the relationship may be very distant, the marketplace acts as a trading system, or we have so much power that we choose to ignore the suppliers interests.
However, and even in the last case, it remains important to understand what the other side of this commercial relationship is interested in, as this may hold the key both to a successful negotiation, but also to a well-founded long term relationship.
Examples of businesses ignoring suppliers interests are many. The most basic example is institutional flaunting of payment terms, sometimes for justified reasons, but more often because of systems in place which have become successful slowing down cashflow to suppliers. On the buying side (not just the purchasing organization, but the various parts of the organization which are involved in a purchase, including the specifiers, accounts payable, purchasing, legal, the recipient of the product or service) we need to recognise that the ability to provide money to our suppliers in a timely way for delivered products and services is a fundamental part of the relationship in place. The supplier has an interest in that working well, as if it does not there is a need to finance the missing cash until it turns up.
Beyond that most fundamental part of a commercial transaction, built into the formation of a contract, there are other interests which are useful to understand. Sales cycles and bonuses are worth recognising, as they can drive urgency towards a particular sale, which may not exist on our side. Equally, there may be particular benefits and emphasis on some areas of a product or service which, if added in, give substantial benefit to the sales team.
Other areas of interest can be identified from press reporting or company reports. A focus into a new marketplace, either by product type or by geography, can be an area of interest which, if we can help satisfy it, will provide a greater need for co-operation with our interests. Similarly, if there is a supplier interest in having a client for a new product or service offering, that can also provide us with benefit.
The issue, then, is how we identify the areas of interest which the supplier has prior to a negotiation. There are a relatively small number of areas to explore, in the areas of basic supplier research, and also the more obvious approach of asking them what they are interested in.
Supplier research is a short process where we identify the key areas of information which we need. We often see procurement teams approaching this without a clear idea of why it is important. Once again, the need to develop insights from the information gathered is the primary purpose, and in this case, the insights we are aiming to develop are an understanding of the [possible interests which a supplier has, taken from a broader analysis of their business and our current knowledge of their approaches.
Getting an understanding of what their interests are through discussion can be faster. The sales team, key account managers or friendly executives should be able to express more clearly the sorts of areas they are actually interested in meeting. As with our own businesses, there may be different views available from different individuals and as such we need to be diligent in tracking this down and building a broader picture of those interests.
Once we have a view of this, we are able to test for alignment with our own interests. Where there are common factors, it can make for open discussions. However, there are often areas in which the interests are misaligned, but one party can help the other at little cost or effort to itself. Seeking these areas can provide a dramatic offer of value to one side at little cost to the other, which is a powerful negotiation tactic in itself.
There is a tactical challenge in this whole approach; we need to get used to the idea of seeking and exploring the interests of the other side, as a way of benefitting ourselves. This can seem counter intuitive, but in reality it is not. We know from our personal relationships that being interested in only our areas and not interested in the other side is a way of having a poor evening out. Embracing others interests is a powerful way to engage in a negotiation.
Our next blog will look at the supply market and its impact on negotiations.
To find out more about our approach to negotiation, please contact us at www.futurepurchasing.com/contact
Tagged by topic: Negotiation
by Mark Hubbard