Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

Category: Purchasing Negotiation

  • Negotiating with Suppliers that have ALL the Bargaining Power

    I have more and more clients that are struggling with pandemic negotiations with suppliers who hold all the bargaining power.  There’s really only 2 things that can be done to address this:

    1. Change the bargaining power dynamic
    2. Drive Investigative Negotiations and Value Creation

    Or you can keep hammering the supplier on price, but you are already doing that, and you were doing it before the pandemic too.   And right now it’s not working, or you wouldn’t be reading this I suppose. 

    Changing the bargaining power dynamic comes down to identifying the source of the supplier’s bargaining power, and then taking steps to reduce the value of that source and/or increase your bargaining power in turn. 

    The end goal of changing the bargaining power dynamics is to create a circumstance where your offer is perceived as being more desirable than it was previously. 

    I remember something Carlsberg Beer did with their soda ash suppliers (glass bottles are made of 70% sand and 30% soda ash).  The sand was plentiful, the soda ash was not.  They were dealing with a powerful oligopoly – almost a cartel of sorts.

    The soda ash suppliers were dictating the terms and getting them, because there were few alternatives.  Carlsberg didn’t know what to do.  The source of the supplier’s bargaining power was the oligopoly and Carlsberg’s lower volume. 

    Carlsberg couldn’t change the oligopoly, they couldn’t use something other than soda ash, and they couldn’t wave a wand and suddenly increase their volume requirements.  

    Or could they…..

    Carlsberg decided to take a disruptive sourcing move and talk with supply chain partners buying soda ash as well.  They put their requirements together and went to the oligopoly with a massive volume that was irresistible.  All in one take it or leave it contract offer.

    Now the oligopoly companies were going head to head for the business and a sweet deal was landed.  The bargaining power dynamics, once hard as steel, were melted away and the tables were turned.  

    This is just one example of how to change bargaining power dynamics.  You have to dissect the source of the bargaining power and take moves to undo it.  

    The other thing you can do is to drive Investigative Negotiations and Value Creation.   I have endless client examples of this.

    One example is with Tata Steel.   Tata is probably the biggest company in India – a massive conglomerate that has no equal elsewhere in the world that I’ve seen.  You can’t breathe air or drink a cup of coffee in India without Tata being involved.      

    They were negotiating with a German mining equipment supplier, the best in the business.   The Germans tend to do business cut and dry.  They had a hard as steel fixed pricing schedule.  Tata wasn’t going to get a single penny deviation from that schedule. 

    Tata thought about this problem, did some research – Investigative Negotiations – and realized that the mining equipment supplier had zero foothold in India.  How could this be?  But it was true. 

    That meant that they didn’t understand how commercia precedents worked in India.  They explained to the supplier that the volume at stake was not just that of Tata’s. 

    They explained that when Tata buys from a given supplier, this is an implicit seal of approval that the entire country of India uses to start buying from that supplier.  They then went through a myriad of examples. 

    They explained to the supplier that whichever company wins this business also wins the whole of India’s mining business.   This suddenly made the pie much bigger – Value Creation. 

    The rigid German supplier came back on their hands and knees with an incredible proposal to win the Indian marketplace.  Their first deviation ever from their hard pricing schedule.  

    Tata signed the deal, whereby the German party made far less money at the transaction level, but stood to gain FAR more in the aggregate from this new marketplace.   Both parties were thrilled with the outcome. 

    That’s exactly  how you do Investigative Negotiations and Value Creation. 

    If you are trying to solve your supplier bargaining power problems with management escalations and hammering the supplier, you’ll lose a lot of hair, but you won’t accomplish much else.     

    Read this Twice:  Doing what you’ve always been doing in negotiations will only deliver you the same results that you’ve always been getting.  And that’s not good enough.

    Now go off and do something wonderful.  Be your best!

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    www.PSCMInstitute.com 

    P.S. If you want to be a ROCK STAR at driving strategies like the above, check out the 100% online CPSCM™ Certification Program at https://pscminstitute.com/certification/.  You will see the materials and hear my voice throughout, as your own private instructor.  With almost 50% of the Fortune 100 having invested in CPSCM™, there is no equal in the marketplace.  Invest in your career and results today.  

  • Writing the Other Party’s Negotiation Victory Speech

    Something we focus very little on in negotiations is how to make the other party look and feel successful out of the deal.  All of our focus is on how to make ourselves look, feel, and actually be successful in negotiations – and letting our management chain know. 

    But the other party has a management chain too.  And do you know what happens when they look and feel cleaned out in negotiations?  The other negotiator may get demoted.  They may get a bad performance review. 

    Additionally, their management chain may deprioritize your account.  They won’t pick up the phone. And every single time you ask for something small, you’ll get an invoice for it.  They’ll get their money back. 

    You have to have a CONSCIOUS STRATEGY to ensure that the other party looks and feels successful out of the deal.  It’s good for them.  It’s good for you.  They’ll treat your account better, and they’ll service you better.  They’ll want you to be successful.  

    Probably the best example of this you’re going to find is in the National Football League.  Even if you’re not into sports, you will learn endlessly by watching sports negotiations play out.  If you want to be a world class negotiator, this has to be part of your ongoing training regimen.

    I just saw an announcement from a football team that they signed a much better than average football player to the richest deal for his position in NFL history – 5 years, USD $100 million.  It’s a mind blowing deal for someone who is very good but not the best at his position. 

    But the details have not yet been made available.  This is intentional, to let the player and his agent both bask in the limelight. 

    The player gets to say that nobody in the history of the NFL has ever gotten more at that position, and the agent gets to say that they were the one who brokered such a deal – enticing other players to sign up with him.

    And the NFL team gets to bask in the limelight too.  The message is “We pay our players above market value.  Come play for our team.  We pay more than anyone else.”

    Now what will the details of the deal look like?  I can tell you without them ever having been announced. 

    It’s probably in reality a 3 or 4 year deal that has been structured as a 5 year deal.  The last 1 or 2 years will have a ridiculous salary that the team will never pay, because they will have put a termination for convenience clause just before those years kick in. 

    The team knows it, the player knows it, and the player’s agent knows it.  They all know that it’s really, say, just a 3 year deal for $52M – fair market value for the player.

    All 3 parties agree to add artificial years and compensation the backend that all 3 parties know will never happen.  It’s all about writing each other’s victory speech. 

    And when the actual details go out, nobody will talk about them, because it’s not to anyone’s benefit to do so. 

    And when year 3 or 4 rolls around and they release the player or renegotiate a new and more reasonable salary, nobody in the public will remember what was announced when the deal was first struck.  Nothing lost.

    This is just one of many strategies that can be employed to write the other party’s victory speech.  We go through this in detail in the CPSCM™ Certification Program.  Contingency agreements can be put in place.  The way in which concessions are captured and communicated can be modified. 

    There are many ways to go. But this has to be part of your arsenal.  It’s good for all parties involved, and you’ll get better results as well.  

    Now go off and do something wonderful.  Be your best!  

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    P.S.  We are constantly making CPSCM™ even better.   Two new game changing modules (Module XIII & XIV) have been added to the CPSCM™ Certification Program.  Have you seen them?  Check it out!  https://pscminstitute.com/cpscm-for-individuals/

  • Here’s Why Your Legal Dept Holds Up Negotiations

    Here’s Why Your Legal Dept Holds Up Negotiations

    I’ll cut to the chase on this one: The problem is not the legal department.  The problem is you and your procurement dept.  Let me explain.

    There’s really a few pieces involved.  We’ll knock one of them out now.  The legal dept is viewed as overhead.  That means they will never be sufficiently funded, and all stakeholders get impacted by that.  But we can easily overcome this by doing some other things right.  Lets keep going.

    Another part to this problem is that procurement throws red-hot contracts over the fence to legal and asks them to swiftly approve.  You might ask “what else are we supposed to do?”. 

    Well, you have to remember that contracts are risk shifting vehicles, and there are two basic types of risk: legal risk and commercial risk.

    Legal risk includes the potential for financial loss, litigation exposure, vulnerability to damages, public relations exposure, etc.  In short, the legal dept is really focused on limitation of liability, damages, indemnification, insurance, dispute resolution, and intellectual property. That’s their basic scope. 

    And with all the endless hours the legal dept spends in negotiating those clauses, how often have they actually gone wrong for you?  The answer is never.  Most procurement professionals go an entire career without needing any of the provisions that legal negotiated for those clauses.

    So why do we negotiate them at all?  Because they’re like seatbelts.  You put them on 500,000 times in case something happens once.  They’re important, and we need them. 

    Now the remaining clauses are all related to supplier performance.  Clauses that define what the supplier is to deliver, tying payment to performance, and ensuring that there are pre-defined remedies for failure to perform to these measures.

    Do you know how often these factors go wrong? How about almost every single contract you sign!  And do you know how much training your legal dept has in negotiating these clauses?  How about almost none at all! 

    And it’s not their fault.  It’s out of their scope.  It’s in your scope exclusively.  Did you know that?

    Read this twice: The #1 mistake procurement professionals make is to assume that when a lawyer approves a contract, that means it’s a good deal for the business. 

    WRONG.  It could be a terrible deal for the business. The lawyers are just focusing on the legal terms.  The commercial terms, which you are supposed to own, the ones that always go wrong, aren’t a part of their focus at all. 

    And so all the supplier performance trainwrecks that you have are because of the above.  Contracts that are highly effective in mitigating the risk of things that NEVER go wrong, and highly ineffective at mitigating the risks that ALWAYS go wrong!

    Now we get to the third part of the problem.  Our profession likes to save the contract language for last.  We tell the supplier “let’s negotiate price/warranty/leadtime/etc first, then we’ll get to the Ts & Cs.”

    Well, I have news for you.  When you tell that to a supplier, you’ve just become red meat in front of a lion. 

    What they hear you saying is “let’s finalize the commercial terms so you have the business in the bag.  Then once you’ve fully secured the business and have nothing left to lose, we’ll review the contract, and you can redline the entire contract because there’s nothing I can do about it.” 

    Read this twice: Contract terms that are “saved for last” in negotiations will always result in endless heartache for both you and the legal dept.  And those contracts take three times as long for the legal dept to process, because so much more is redlined. 

    And why does the supplier redline so much more when you save the contract for last? 

    Answer: Because they can.  Because you encouraged and incentivized it.  Because they’ve already won the business. 

    The final piece that procurement does wrong which results in the legal morass above is to not be legally savvy themselves and to not have a Service Level Agreement (SLA) with the legal dept. 

    The procurement dept needs to know contract law the same way a mechanic knows a wrench.  The relationship must be that intimate.  And once this knowledge level is established, then an SLA can be negotiated with the legal dept whereby many of the clauses can be negotiated by procurement, absent legal dept involvement. 

    And if you do all the above correctly, by the time the contract goes to legal, the contract will have far fewer redlines, many of the issues will have been resolved by procurement already, and the supplier will not yet have the business in the bag, because the contract terms were negotiated first and not last.  Also, the commercial terms, negotiated by procurement, will be rock solid. 

    Lets move this profession forward together. You can do this.

    Now go off and do something wonderful.

    Be your best!

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp. 

    P.S.  We are pleased to announce our new brand: Procurement and Supply Chain Management (PSCM) Institute.  Our new website is www.PSCMInstitute.com.  We have a special offer waiting for you: sign up for Free Membership and get exclusive access to our Power Purchasing Pro course, normal price $397.  Many other benefits await.  Register now!

  • The Fallacy of At The Table Negotiations

    The Fallacy of At The Table Negotiations

    I saw an article just this last week in LinkedIn describing different scenarios for buyer and seller to go back and forth on negotiation terms for best outcomes – offer, response, counter offer, counter response, etc. 

    It was touted as a game changing system, and was even given a name and trademarked, indicating it was something new and innovative. 

    It’s something I’ve been familiar with since the early 90’s, and I regret that it’s still being taught.

    If you go back to the invention of currency, and probably much earlier, this is how we always negotiated.  Each party trying to get more of the pie in return for less of what they have to offer in return. 

    This was the earliest form of what I call “At the Table Negotiations”.

    Meaning, this trademarked system is hardly new.  Yet it’s highly glorified.  It’s what we picture when there are the greatest stakes of all – with parties intensely negotiating at the table. 

    But all of that is for people who learned how to negotiate by watching TV shows and movies.  Or perhaps as a child, watching your parents barter at the local market. You’re not going to win any negotiations this way.

    Read this twice: Negotiations are won and lost before they ever start.  They are won FAR before you ever engage in At the Table Negotiations.  Anyone who tries to teach you how to win negotiations at the table is at best still stuck in the 1950’s.

    There really needs to be a well rounded approach for achieving success in negotiations.  In fact, the very definition of negotiation success needs to be redefined.

    The 1950’s and prior definition of negotiation success is how much of the pie you can get.  It’s parasitic negotiations.   You gain at the other party’s expense.  Value is being transferred instead of created.

    Negotiation strategies need to involve value creation before going to the table.  This involves researching what keeps the other party awake at night, and creating strategies to help make them more successful out of the deal, while costing your side very little. 

    This is why you are paid the big bucks, and it’s not optional in high stakes negotiations. 

    The other piece that has to be done is bargaining power analysis.  If you find yourself in a negotiation where you lack bargaining power, then you’ve driven yourself to the middle of the desert knowing you have no gas or drinking water.  You can’t let it get to that stage.

    You need to do an in depth analysis of what the source of their bargaining power is.  What exactly and specifically is it that gives them their bargaining power?  You need to understand this FAR in advance of negotiations very, very well.

    What might it be?  Almost anything.  Here are just a few:

    • Perception of highest quality
    • Monopolistic supplier
    • Switching or startup costs associated with adding or switching to new supplier
    • End user or business unit allegiance
    • Production capability
    • Access to critical material(s)
    • Etc.

    Then you need to architect a strategy to change that bargaining power to your favor.  The shift may not happen right away – it may even take years – but you can conspicuously lay the seeds right under the supplier’s nose.  They’ll get the picture. 

    Then there’s internal negotiations.  Most external negotiations fail because of failed internal negotiations.  Being fully aligned on the SOW/Spec hardly qualifies as internal negotiations alignment. 

    There’s alignment regarding procurement and negotiation strategy, sourcing approach, business shifting, standardization, alternative materials, timing, external communications, internal communications, management influencing, deal positioning, cost modeling, vendor evaluation criteria, and so much more.

    This is just skimming the top of things that need to be done in advance of At the Table Negotiations.  If all you are doing is getting trained in and executing to At the Table Strategies, you are stuck in some very old quicksand. 

    The CPSCM™ Certification Program – already invested in by half of the Fortune 100 – will position you to fast track your career and be a Negotiation Godfather.  In exactly 32 days, a huge announcement is coming and all of you need to be paying attention.   CPSCM™ Certification is going to be attainable by everyone.  Don’t miss it.

    Now go off and do something wonderful.

    Be your best! 

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    www.CenterforPSCMexcellence.org

  • Purchasing Negotiation Training – Get Out of Dark Ages

    Get Your Negotiations Out of the Dark Ages

    No matter what industry or geography I get contacted by, the request is always the same: “come talk to us about negotiations”. Purchasing Negotiation Training

    It’s a hot topic, that’s for sure.  I’m just not happy with the state of the union though.

    There’s so much bad information out there on negotiations.

    There was a time when purchasing was very transactional, by design.  We’re talking pre-1980’s.

    Customers opportunistically decided who they would do business with and the goal was to get what you wanted, as fast as possible, from whom you wanted, at the price you wanted – it was all about the win, for the person with the money that is.

    High stakes negotiations were viewed as warfare, and like any war, the goal was to make out on top in the conquest.  If the supplier didn’t like it, they could go pound sand, because you were the one with the money, and you could call the shots.

    The goal was to get an unfair advantage, to get the upper hand, to use deceit and aggression, to use psychological warfare to to paint the supplier in a corner.

    We are now entering the era of supply chain management.  It won’t just be companies competing;  supply chains will be competing too.  Without an effective supply chain, companies are rendered ineffective as well.

    Supply chain councils will be governing the effectiveness of the supply chain.  The council’s scorecard success metrics that are measured and monitored will be for the good of the chain, not for the good of the individual links. Costs will be taken OUT of the supply chain instead of forcing suppliers to make less profit – so purchasing can report more savings.

    If an individual company in the supply chain is faltering, they don’t get dumped like yesterday’s newspaper and unceremoniously have their business put out to bid.

    Instead, the supply chain council will try their best to support the companies in the chain in good times and bad, investing time and resources in them to help them be successful – for the good of the chain.

    Only the worst of conditions will result in a supply chain link being replaced, because – just like divorce – the total cost of doing so is very high.

    Back to negotiations training.  Given this supply chain model above, if the goal is to make the supply chain effective, it makes absolutely no sense to employ 1950’s tactics to get the upper hand or get an unfair advantage in negotiations.  How does that benefit the supply chain?

    This sort of antiquated negotiation training, which is out there everywhere in our profession being taught, needs a one-way ticket to the nearest landfill.

    You know the type of boss who you would take a bullet for?  It’s probably been a while, but you know exactly what I’m talking about.   You really cared about them, because they cared about you.

    Negotiations are no different.

    What you want is a set of powerful negotiation strategies that invoke INTRINSIC MOTIVATION and make the other party WANT to help make you successful, and leaves them feeling great about the deal.

    You cannot negotiate effectively with anyone unless they know, like, and trust you.  Period.  And you’re not going to achieve that with 1950’s tactics and counter-tactics that involve psychological leverage.

    If you’re doing these things, it’s not your fault, it’s probably what you’ve been taught.  But it’s time to stop.

    Do you know how you’ll know that “you’ve arrived” as a purchasing and supply chain management professional?

    You’ll know you have arrived when you can exceed your TCO objectives in a negotiation and the supplier feels great about the deal.  There’s a lot of strategy that goes into making this happen, and it doesn’t happen accidentally.  But that’s the outcome you want.  I can put you on that track.

    Procurement pros, we are in the BEST profession in the world.

    My challenge to you, as always:  Be your best!  Don’t ever settle for anything less.

    See you next week!

    Omid G

    P.S. We’re putting the finishing touches on my new negotiations course, “Negotiation Strategies for Breakthrough TCO”, that will get you out of the old and into the Now.

    There is nothing like to this new training that will put you into a league of your own, and I can’t wait to get it into your hands. Stay tuned!

  • Purchasing Negotiations Training

    Purchasing Negotiations – Is Your Style Adaptive?

     

    You’ve been doing a lot of things the same for a long time.  Life would be too complex otherwise. Purchasing Negotiation Training

    Imagine if every time you wanted to brush your teeth, you had to sit and think about which teeth to start with, what type of strokes to use, how much pressure to exert, etc.

    The mundane would suddenly become a huge time sink, and there’d be no guarantees that you’d end up with better results.  It would be a nightmare.

    Luckily, your brain has accounted for the mundane.  It’s a part of your brain called the “Paleo-Cortex”.  No higher order thinking happens here.  Just the mundane, your regular rituals.

    Even making coffee or breakfast is governed by this part of your brain.  Unless you are using higher order thought when you scramble your eggs – and if you are, you have more problems than I can help you with!

    In any event, why would I even bring this up in a negotiations blog?

    Well, my concern is this: I’m worried that your negotiation strategies are stuck in your paleo-cortex, where they shouldn’t be.

    Why do I care?  Because all the training in the world does you no good if, in the heat of the moment, you revert to learned behaviors that are very possibly part of the problem.    Just because they are learned behaviors doesn’t mean they are productive ones.

    Worse yet, there will be no flashing neon sign telling you that your paleo-cortex has taken over.  In fact, you will be more at ease than ever.

    Why? Because the mundane is, well, mundane.  It requires little energy and little thought.  It just happens. And in our industry, that is not a good thing.

    Many bad things happen when let your paleo-cortex take over in negotiations.  Probably the worst is that you will employ a “one size fits all” approach in negotiations.

    Why is this a bad thing?  Why can’t you use a consistent strategy in negotiations?  Because a consistent strategy in negotiations will get you consistently bad results.

    Why? *Hear me clearly*:  Because your ability to be successful in negotiations hinges on you reading the situation and customizing a negotiation strategy for that situation.  Negotiations involve people and personalities, all with different motivators.

    Heck, even my 3 kids, all of whom are close in age, have completely different motivators. Each of them gets motivated by and responds to something different than the others.  I have to change my approach depending on which one I’m trying to influence.

    Why would adults, with all their idiosyncrasies, be any different?

    Negotiations is the art of achieving your high value TCO objectives while ensuring the other party feels good about the deal.  Even a cave man can sacrifice on price to make the supplier happy.  That doesn’t take any skills.

    Therefore, if your job is to find out non-price related motivators, you have to put your paleo-cortex to sleep and start really focusing on why the other person is in this negotiation with you, and what they need out of it to be successful.

    You also need to figure out what personality type they are.

    Some personalities are impatient and want short and succinct communications that get to the point – they thrive on time to results.  Others thrive on rich face to face communication and interactions with no rush.  Still others thrive on process flow documentation to ensure no excursions. Finally, some thrive on the status quo – they are willing to change, but they want to know why before they do.

    These are in fact the 4 high level personality types that you will find when working with people.  There’s much more to this, but for the purpose of a blog, this is what you will find in a nutshell.

    By understanding the personalities of everyone around you with whom you negotiate (and believe me, that’s everyone), you can do something incredible:

    Instead of negotiating using principles that are comfortable for you, you instead negotiate using principles that are comfortable for the other party, because you understand how they tick and what motivates them.  This gets you breakthrough results, with suppliers feeling good about the deal.

    The paleo-cortex couldn’t do this to save its life.  So keep that part of your brain focused on the things you truly don’t care about – like your methodology for washing your hands.  Once you check into work, put the rest of your gray matter to work and nail those TCO results.

    We’ll talk with you next week.  Be your best!

    Omid G

    P.S. Become Elite in our profession. Get my Elite Purchasing Training Here. 

  • Purchasing Training ~ Breakthrough Negotiation

    Getting Breakthrough Negotiation Results

    Suppliers are pretty smart.  They are smarter than you think actually.  Did you know sales people spend up to 40% of their time in training, while purchasing on average spends less than 2% of their time in training?

    It’s no wonder they are able to be so capable in selling solutions.  And as the old purchasing saying goes, “a solution looks suspiciously like a good or service, except it costs a lot more.” Purchasing Negotiation Training

    Here’s the deal.  Suppliers are well trained in negotiations.  More than most purchasing professionals.

    What does this mean to you?  It means when you aren’t prepared, or aren’t prepared enough, they will know it.  They WILL know it.

    But the issue continues.   They are not going to tell you that they don’t feel you are prepared.  They are actually trained on how to respond.  They are sure as heck not going to let the cat out of the bag and send you back to the drawing board for further planning.

    What kind of responses do suppliers come up with?  Their goal is to show you that the knife is cutting deep, and that you are the one wielding it.

    In fact, they will also make you feel like a superhero in the process.  Be prepared to hear things like this:

    “Nobody has ever been able to drive this kind of negotiation outcome like this before with us.  I had to break every rule in the book to make this happen, and getting this deal done required approvals all the way up to the head cheese.  You should really feel good about what you’ve negotiated with us.  This is not the norm. ”

    Pretty compelling, huh?  The problem is almost none of it is ever true.

    You see, there is only one thing that defines a good deal, and that is DATA.  Benchmarking, competitive bidding, favorably written Most Favored Customer contract clauses, cost models, value analysis – these are what define a good deal.

    But the supplier’s goal is to keep the focus away from those things, because then suddenly things become difficult.  Data is difficult to refute.

    It’s not their fault for doing all of this by the way.  Think about it, are any of your suppliers non-profit organizations?  Probably not.  They are in the business of making money.  That’s their job.

    So you need to do your job.  Don’t judge your negotiation skills and capabilities be judged based on  a supplier’s response, words, or actions.

    Judge your negotiation skills and capabilities by your preparation, and look at what the data tells you.  Let the data paint the picture.

    Not only that, let the data guide your strategy.  Negotiations are won and lost before they ever start – it’s all down to how you prepare, and what sort of analysis you do, and how you use it.

    On top of that, you need to get your behavioral strategies down pat.  We’re not trying to “get the upper hand” – that’s a 1950’s strategy.

    We’re trying to identify what unique motivators your supplier has and determining how to leverage those to create intrinsic motivation models for them to give you an even better TCO value proposition while still feeling good about the deal.

    There is an art and science to achieving breakthrough negotiation results, and I want to key you into these strategies.  I want to give you a chance to learn the powerful and game changing insider secrets I’ve developed to give you the tools to generate these kind of breakthrough negotiation results.

    To that end, I invite you to join us on my upcoming Advanced Purchasing Excellence Training Series Webinar, “Negotiation Strategies for Breakthrough TCO”.

    To learn all about it and join us, Click Here Now.

    Talk with you next week!

    Omid G

  • Purchasing Negotiation Training

    How Much Time Are You Spending Preparing for Negotiations?

    I’m here to break myths and to kill bad practices. We need to start doing business differently as purchasing professionals.

    Purchasing Negotiation Training
    Purchasing Negotiation Training

    Putting out fires all day is not going to cut it. Hey, I’m not an academic, I’ve been there, remember?

    I was doing public and in-house seminars all last week. I over did it and my voice is completely shot in fact. Anyways, I’m always reading body language when I present, and I always know when I catch the audience off guard.

    What caught people off guard in one seminar was when I told them that “negotiations are won and lost before they ever start.” They all looked at me kind of funny. Their non-verbal communication was “how could that be?”

    Well, think about when you go buy a car. Could you imagine going in cold without having done homework on invoice, dealer buy-back, prices from different dealerships, etc? You wouldn’t.

    And the win was in the preparation, not in the negotiation itself. Just ask any championship prize fighter. They train and ten hours a day for one year just to engage in a single one hour fight.

    Sure a lot happens in the ring, but it’s what happened out of the ring that is the biggest factor of all.

    So why should your negotiations be any different? The answer is they are not.

    So my question to you is, what % of your time are you spending preparing for negotiations?

    Be honest. Don’t say what you think I want to hear. And I’ve been in your shoes, so we’re in this together.

    The truth is this: you are so swamped putting out fires (a “fire” = any unplanned activity that consumes time in your day) that you don’t have the time to prepare the way you’d like for negotiations. I know, because purchasing professionals in every industry in 15 countries have told me so.

    What happens then? You become a REALLY good firefighter, but your actual negotiation skills languish, because you never have the time to practice and develop them. It’s a vicious cycle that feeds itself.

    Here’s my take: I want you to be spending 80% of your time allocation for a given contract preparing for the negotiations. Sharpening the axe before ever going to cut the tree.

    The irony is, if you start doing this up front preparation activity, the backend fires start to go away. The reason is that the root cause lies in not taking the time to address preventative measures up front.

    Think of it this way. Suppliers are in the business of making money. Can you blame them? If you are in the private sector, your company is too.

    Let me tell you a little secret: Suppliers know exactly how prepared you are…..or aren’t… when you negotiate with them.

    And let me tell you another little secret: You’ll never know that suppliers are reading your level of preparation and knowledge. Why?

    Because they are TRAINED to act like you are raking them over the coals. They are trained to make you feel like you are the world’s best negotiator.

    What happens then over time is about the same as what happens to a car that never gets an oil change. Things don’t run right and you burn out.

    Make yourself better. Purchasing is such a great place to be if you do that. You may not directly influence revenue, but you sure as heck influence profit. Do you really know how powerful that is?

    Get good at negotiating. Learn how to do cost modeling. Know when to benchmark and when not to. Know how to call the other side’s bluff. Know what tactics they use and how to anticipate and respond to those.

    Most of all, learn the supplier’s motivators – the ones that don’t impact TCO – and figure out how to find a Win/Win in the deal by turning those into concessions that you trade for some big TCO wins.

    Once you get good at these activities, negotiations will be less of an event than they are today. And forget the benefits this holds for your career and income, you’ll be happier with your job. That’s worth a lot in my book.

    FINAL NOTICE: (Only 6 more left.)

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    Here’s a Purchasing Training Solution that applies to every purchasing professional in every geography, in every industry, in every commodity, at every job level, and with every set of regional laws. I guarantee it.

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    – Omid G

     

     

  • Supplier Negotiation Strategies, Part 4

    Purchasing Training - Counter Intelligence
    Purchasing Counter Intelligence

    This is the last in this series for now – a series about supplier negotiation strategies. It’s all about counter-intelligence, and knowing what suppliers may do, and being able to anticipate, respond, and diffuse such strategies.

    Of course I have a multitude of content on such counter-intelligence strategies, but there is only so much I can do in a blog. Consider this an appetizer. The main course can be found in my Award Winning Online Training Solutions.

    The topic we’re going to focus on today is a big one. “Value based pricing” is what sales people spend hours, days, months, years, and eventually decades trying to perfect in their careers.

    Suppliers know the only way to do this is to appeal to the right hemisphere of your brain. The one that is responsible for emotions.

    For instance, when was the last time you saw a soft drink commercial that talked about their product having more bubbles per cubic inch? No way.

    They want you to buy their product based on them showing people having the best time ever while consuming their soft drink. It makes no sense at all. But guess what, it works.

    In order to sell you something based on its value, then the perception of value has to be built up. This is what salespeople excel at. Marketing and perception management.

    Ever compare a supplier glossy brochure to what the product or service actually delivers? Now you know what I mean.

    In order to maximize value based pricing, suppliers can’t sell you goods and services, because goods and services can be benchmarked. They will start calling their goods and services “solutions”.

    To quote Dilbert creator Scott Adams, “a solution looks suspiciously like a good or service, except it costs a lot more.” Right on the nose, Scott.

    There are a few ways to deal with this. And all of it has to do with letting the left hemisphere of your brain take over.

    Think of that gum commercial.. “nine out of ten dentists recommend chewing our gum”. That’s data. You need to make decisions with data. Salespeople are masters of manipulating the perception of value, but they can’t argue with facts and data. It’s their kryptonite.

    The first strategy is to make sure your supplier selection matrix is performance results and specifications based. Glossy brochures and marketing pitches and fancy suits should not be a part of the consideration model.

    Counter glitz with data, and negotiate pricing and total cost based on the documented and measurable performance results you will be receiving.

    The second is to take the supplier’s glossy brochures and marketing presentations and tell them “I’m sure you won’t have any problem if I make this an addendum to the contract and make it a material breach of contract if any of these capabilities are not met by your solution, right?”

    Don’t say it with attitude, just be matter of fact. What should the supplier be afraid of? Their solution is supposed to do all these wonderful things, right? If they get nervous and start to jumble their word in response, it’s because you caught them.

    They are not used to anyone connecting the dots and making their sales pitches a part of the contract. This is your right. They are trying to pitch a powerful solution and they want you to pay for a powerful solution. So what you should receive is a powerful solution, right?

    The third way is to bring them down to earth and say something along the lines of “here are the specifications we are measuring. Can you please confirm for us how you are committing your product and service support will perform to these? We’re going to compare suppliers based on price competitiveness to this criteria.”

    What you’ve just done with this third strategy is to take them out of solution space and pull them straight into specification space, which is where they don’t want to be. Let that left hemisphere take over.

    Take control, and don’t let marketing presentations and fancy hype and glowing testimonials bias your negotiation and decision making process. Put that left hemisphere in high gear and force the supplier to negotiate with you on your terms.

    From now on, every time you hear suppliers use the words “solution”, race back and read this blog again.

    I have a special announcement. I’ve launched a 5 hour Purchasing Contract Law online training series, personally taught by me. This is the last few days for special Members Only pricing.

    In addition, I will also give you a free e-copy of my latest book on the same topic – Purchasing Contract Law (227 pages). World Class Contract Management

    Click here to find out all the details. Prices go back up in a few more days. Don’t miss out!

    Omid G

  • Supplier Negotiation Strategies, Part 3 – Supplier Time Pressures

    Purchasing Training - Supplier Negotiation
    Negotiation Shenanigans

    We are doing a blog series here focused on supplier negotiation strategies.

    This is an appetizer for the kind of “main courses” I teach in my online and face to face training solutions.

    We are learning counter-intelligence about how sales people prepare for negotiations and what tactics they use.

    Guess what happens when you know their tactics? You can anticipate and diffuse them.

    The next one in this series is “Supplier Time Pressures”. Suppliers know that purchasing professionals are overwhelmed. You know it too.

    In speaking to thousands of purchasing professionals in 15 different countries, I’ve yet to meet the purchasing professional who has time to spare.

    So let’s start with that premise, because your suppliers start with that premise too.

    Suppliers will look for opportunities to put you in a time pinch. This happens most famously when negotiations are held at their facility, which we covered last week.

    Suppliers will look for an opportunity to paint you in a corner. It can be something like this:

    “Welcome to Singapore! Now let’s negotiate.” This tactic attempts to force a negotiation when you actually need more time and are in no mood to negotiate.

    Another one is where you schedule several days to negotiate with a supplier, at the supplier’s facility, because you want to see their operations (or because they convinced you).

    The supplier then fills the agenda each day with other activities. These activities can be business or non-business related. They might give you a grand tour of the city and sights, take you to fine restaurants, and treat you like a celebrity.

    It’s a great ride, but it doesn’t come with a happy ending. Suddenly, you find that you have two hours left to agree on a deal. That’s exactly how they want it.

    Are you really going to go back to work and tell your boss you couldn’t get anything done in three days? I think not. And the supplier knows that.

    Something I’ve seen Chinese suppliers do is to make a celebratory public announcement regarding a deal having been culminated between the two of you before you’ve ever started negotiating.

    On top of that, they have a big event prepared to celebrate that they’ve put together just for you. What are you going to do, show up at this celebration event and inform everyone that there actually isn’t a deal done?

    That’s like showing up to a massive birthday bash scheduled just for you and telling everyone your birthday isn’t for another 8 months. Awkward.

    Or suppliers will try to impose their own timelines on getting a deal done, and pretend like they are the ones who have the power of choice.

    Guess what, suppliers don’t have power of choice. It is a privilege to do business with your firm. Don’t ever forget it, and don’t let your suppliers ever forget it either.

    You need to turn the tables. Tell the supplier you are not going to rush to make a deal, that you have timelines, but you are willing to push them if you are not getting the kind of TCO deal you are looking for.

    Then you need to ask the supplier when their fiscal cycle ends and if there are any target dates they want to hit internally for financial or incentive reasons.

    And believe me, those are real, hard dates that every sales professional worth his or her salt has committed to memory. Their financial livelihood depends on it!

    This is when you start to turn the tables.

    Hold firm on your positions and trade TCO concessions on the supplier’s part in return for you allowing them to book revenue by their target dates. It works, and it creates a win/win deal. Both parties get what they wanted.

    Always be in control, always exude confidence, and never let the power of money shift to the supplier’s hands. YOU are the one with the money. THEY are the ones who want it, and YOU have the power of choice.

    Do you want to learn more of these powerful and eye-opening secrets and put them to work for you?

    To Get Started Click Here Now

    Want to know one secret clause that isn’t in your contracts now that will save you 75% time in your negotiations, and how to include it?

    Want to learn how you can virtually eliminate redlining?

    Click Here and get that plus much more

    These are YOUR negotiations, be in charge!

    All the heartache and headache that comes with negotiating contracts is preventable.

    Don’t fall victim to supplier shenanigans! Use these strategies to take complete control of supplier negotiations.

    Next week, we will talk about “Value Based Pricing” as a supplier negotiation strategy.

    There is no better place to be than in this profession. Be your best!

    Omid G