The following article was prepared by Mike Taylor, C.P.M., for distribution to ISM affiliate newsletters
It seems like an oxymoron. How can both parties in a negotiation win? How do I explain this process to management and our supplier? Here is another way to look at it that might help.
Before starting the negotiation define and describe the 'opponent'. Get agreement from everyone involved (including the supplier) that the real 'opponent' in the negotiation is a poorly formed contract.
At the least, bad contracts result in delays, added administrative costs, poor quality, degraded performance and inefficiency. If a poorly formed contract "wins" the negotiation then both buyer and seller loose in the long run.
If, through the process of negotiation, you and the supplier create a good contract, that works for both of you, then you both win. Fail to do a good job of negotiating and the resulting contract will likely have problems.
What is a 'good' contract? Here are some examples:
· Meets the needs of both buyer and supplier
· Encourages buyer and supplier to perform well
· Addresses potential problems
· Prevents surprises
· Avoids ambiguity
· Incorporates lessons learned from previous contracts
· Encourages both parties to continue future business relationships
Both buyers and suppliers contribute language, elements, issues, and ideas that help make the contract better. Each party will try to protect his/her best interest, but savvy negotiators know that a "contract which is not profitable" will drive away suppliers or a contract that is onerous will cause buyers to find other sources. If either party fails to do the best job they can of creating a good contract, then one or probably both will loose in the long run.
Mike Estes, C.P.M. summed it up very well. "I think that there are a lot of people (suppliers, buyers, management, and others) who still believe you have to draw blood to prove that you've beaten the other party and thereby assured yourself or your company of a successful/profitable deal.
Not true! Much better .... not to attack each other as opponents but to work together with your counterpart to identify and eliminate the weaknesses, confusion, ambiguity, delays, and other factors that could cause the deal to turn sour now or in the future.
And, if some unforeseen problem should arise in the future, isn't it reassuring to know that due to the teaming relationship that has already been developed, the other party will work with you to help attack and slay the dragon that threatens to undermine and ruin your deal/contract."
I think mike and I agree, both the buyer and supplier can truly be winners when they negotiate a good contract.
Hope this helps!
Read more articles about negotiation and creative contract solutions in the MLTWeb Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm
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