NEGOTIATING LONGTERM RELATIONSHIPS

Excerpts from the seminar
PLANNING BETTER NEGOTIATIONS

MICHAEL L TAYLOR, C.P.M.

Premise: The negotiating process is different in a long-term Buyer Seller relationship.

We have all read about and learned to negotiate the day-to-day problems that make the Purchasing Profession so interesting. The traditional process includes the use of strategies and tactics designed to obtain the best agreement. Shrewd negotiators have learned to find the agreement that is best for both companies, however, they sometimes have to be manipulative and wield power in order to get to the bottom line.

In a buyer-seller relationship, one party can control the process only so long before the relationship begins to strain. After years of being manipulated, even the best relationship can turn sour and become too adversarial to continue. In the past, this was taken for granted since everyone knew that buyers and sellers had differing agendas and needs.

However, in recent years, buyers and sellers are rediscovering the long-term relationship. They have learned that by working together there are common goals that will be beneficial to both. Partnering, understanding, mutual goal setting, cutting the supplier base and working together are the new buzzwords of the profession. Companies are learning that a win-lose negotiating battle doesn't consistently establish the trust needed to maintain the new relationship.

There are changes that must be incorporated into the negotiating process to help establish and maintain a long-term relationship. Just calling it "Win Win Negotiating" doesn't make it different. There are attitude and process changes that must occur if you are to develop, nurture and raise a long term relationship to maturity.

Not Convinced? Consider the following examples:

WHEN SHOULD WE NEGOTIATE A LONG TERM RELATIONSHIP?

• Xxtra Good Machine Tools, Ltd. is the only manufacturer of the 8- way packing machine that packs 90% of your company's product. They are the only source for spare parts.
• Your company has a fleet of 10 trucks that use liquid propane. Each truck needs a re-charged fuel tank every day.
• You consolidate all of your office supplies into one large requirements order and it takes 3 months to identify all of the various products, reach agreement on pricing and place an order.
• You and your spouse are trying to select the location for your next family vacation.
• Your talking with your family about where to have Thanksgiving Dinner.
• Your trying to convince your manager to send you to the NAPM Conference in Washington, D.C.
• Commodity is Scarce (or is going to be)
• Desire to obtain "extras"
• Is a problem Purchase
• Lock out competition
• Lock-in supplier
• Opportunity to control costs
• Too busy to keep re-buying it
• For Value Engineering Opportunities
• You want to maintain a relationship for future benefits

In a long term relationship the opportunity often exists to negotiate aspects of the agreement which are not always available in other negotiations. Examples:

ISSUES TO NEGOTIATE FOR LONG TERM

1. Access to Computerized Inventories
2. Access to Computer Systems
3. Authorities
4. Controlling problem makers
5. Cost cutting procedures
6. Efficiency improvements
7. Ending the contract/relationship
8. EXTRANET ordering relationship
9. Fair profit vs fair value
10. Goals of the relationship
11. In-Plant Support, inventory
12. Internet Web Page Sharing
13. Key players
14. Operating procedures
15. Power balancing
16. Problem resolution process
17. Product improvements
18. Sharing of cost savings
19. Structure
20. Term

	MLTWEB is assembled and maintained by Michael L. Taylor, C.P.M.
	Materials and articles prepared by Mike may be shared for purchasing education provided that this source is cited and no fee is charged. The rights for any other use are withheld.
	Copyright;  Michael L. Taylor, C.P.M.
	Last Updated: 05/21/2008