Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

Category: Purchasing Process

  • 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 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 Training ~ HUGE Secret

    This week Omid delivers his purchasing training blog on YouTube from his man cave. This one purchasing tip alone will cause a massive paradigm shift in your purchasing career.

    If you enjoyed this video, please share with your colleagues. Thank You!
    Purchasing Training

  • The Purchasing Organization’s Biggest Enemy

    We talked earlier about purchasing professional’s biggest enemy being a lack of contract knowledge, thinking a contract approved by the legal department Purchasing Trainingis a good contract, and using contracts as seat belts instead of as anti-lock brakes – resulting in endless time spent putting out fires in your day job.

    Now let’s take a different angle.

    What is your purchasing organization doing wrong? Well, to be totally honest, probably a lot of things. After all, we all landed in this profession by accident, and then we report to people who landed in it by accident.

    And eventually purchasing reports to somebody who never landed in it at all, doesn’t understand the function, and would rather see a proctologist than listen to a presentation on why purchasing is important. Let’s not even go there.

    So what’s the biggest issue facing purchasing organizations today? Supply chain management, right? Green business? No, these are really important, and becoming more important, but those are not today’s most pressing problems.

    The most pressing problem is purchasing organizations operating in silos. That’s it. I know of a business that is comprised of 72 divisions. All of those divisions are basically doing the same things, and are definitely buying the same things.

    But guess what? Each one of those 72 divisions has their own buyers. And each buyer will claim that their needs are “different”.

    Do those buyers report centrally into one purchasing director? Heck no. They report up into the president for each division of this conglomerate. And do you think a president, with his or her own budget and “unique” needs will want someone else buying their things? Heck no.

    Egos get in the way, “not invented here” gets in the way, reporting structures get in the way, perceived differences get in the way, but most of all…..organizational centric thinking gets in the way.

    As a purchasing professional, you just cannot focus on what’s good for you or your department or every your division. You have to focus on what’s good for the entire company or agency, with the largest possible definition for “company” or “agency” as possible.

    The focus has to be on the REAL customer. What would they want you to do?

    But who is your real customer? The person who generated the demand? Wrong. That is the end user.

    Your REAL customer is the tax payers in the public sector, the board of directors and stock holders for publicly owned companies, and the ownership of the company for privately held companies. Period.

    All that matters is what benefits them, provided of course you are operating legally, ethically, and doing things that are right for the environment and the local business community.

    Now think about if these 72 divisions acted as one. You could probably slash their headcount by 90% and get better results. People don’t have to get laid off, they could get allocated to other more value added positions in the organization.

    Think about how much sense it makes to put out 72 RFPs for the same thing instead of doing it once. Think about how much sense it makes to individually assess ePurchasing solutions and individually fund – or not fund – them, and then have different instantiations in place.

    Just imagine if your household was comprised of six people, and all of them would buy milk in 8 ounce containers at local mini-marts, for their individual needs, instead of one of you buying them in one or two gallon packs from a large supermarket. Repeat this process for all household purchases. Everyone acting in their own personal interest.

    How much redundancy would there be? What could those other five people be doing with their time instead? How much cheaper would these items be if you bought them once to meet household needs? How much more organized would your refrigerator be? How would you keep track of all those small containers and food items if you didn’t?

    Does any of this sound sane to you? Well, chances are, it’s exactly what your company is doing today, in one form or another. And if you think they are not, then look bigger picture.

    Ask the question, is your ENTIRE company, inclusive of sister organizations, parent organizations, etc buying everything it could centrally?

    Now by “buying”, I mean putting assessing demand and putting contracts in place for the entire company. The actual buying against that contract would happen regionally of course.

    Think of the whole US government. Why do we need more than two contracts for office supplies? Janitorial supplies? White boards? Cubicles? I’m being serious. I say ‘two’ because if one vendor has a hiccup, you want the other one to be able to cover demand. But why can’t we do this for all of our national expenditures?

    I bet there’s more money here than in healthcare reform. I bet there are thousands of little contracts negotiated and being negotiated out there, just for office supplies for various divisions and agencies of the US Government. Why can’t we get our act together and act as one?

    This is not a gripe session, far from it. And this is not just aimed at the public sector either. I’m trying to get you to think big picture. This applies everywhere.

    And if you say “our company/agency/organization is different, we don’t do things that way,” then unfortunately you are allowing yourself to be a part of the problem and not a part of the solution.

    Go make a difference. Nobody ever got anyplace without ruffling some feathers. Put your sights not just on what the end user wants, but moreso on what the REAL customer wants… or should want and doesn’t know it. If they don’t know it, it’s your job to tell them.

    Be your best, and talk with you next week!

  • 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.

    It’s a game changing, purchasing contract law Membership course that’s perfect for you.

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    Click Here now to take the 30 day test-drive and to see everything you’re going to learn so that you know that it’s right for you.

    Embrace the opportunity, and be your best!

    – Omid G

     

     

  • The #1 Deadly Mistake Purchasing Pros Make

    After twenty years of doing thousands of hours of purchasing training and seminars and consulting in 15 different countries, I think I’ve seen it all. Purchasing Training - Contract Negotiations

    There are so many lingering opportunities in our profession to do things better. Purchasing pros are deeply disconnected with what’s not working however.

    How do I know? People only want me to come talk to them about “negotiations”. That’s all they want to know about. They don’t want to hear about any other topics.

    Maybe because Intel Corporation named me “The Godfather of Negotiation Planning”, I don’t know. I do know that I started out just like you, but Intel allowed me to restructure how their entire purchasing process was done, from top to bottom.

    Because of that, I went from being stressed out and miserable with my profession, to quickly rising through the ranks and running Intel’s entire global purchasing operations organization, with $2.2 BILLION in total scope and responsibility. The stress vanished and I now had fun and made truckloads of money in our profession.

    Please don’t think that I’m being braggadocios, that’s not why I tell you this. It’s only to let you know that there is so much opportunity for you in this profession that in so many ways, still resides in the olden days of the 1950’s.

    You can change it all, so much for the better and that’s why I do my best to help you achieve that paradigm shift from the antiquated, useless industry standard, to the tested, proven, and highly effective strategies that my world-class purchasing students now use and enjoy.

    Our profession has been reading too many glossy negotiation seminar advertisements in airline magazines. I have no other way of explaining it.

    The ability to negotiate effectively is a gap, no question, but it is not the biggest gap. Not even close.

    Half of my job is convincing purchasing pros that they have bigger issues.

    The other half is then training with world class principles on these other areas, once they’ve actually understood that they have many other pressing issues.

    So what is the #1 mistake that purchasing pros make?

    I’m putting all my cards on the table. All in. The #1 mistake is unquestionable.

    HERE IT IS: Purchasing professionals, even the best of them, consistently write bad contracts. Really bad contracts. And worse yet, there is very little interest in getting better at writing them well. Worse than that, they don’t even know they are writing bad contracts.

    Why should you care about your contract skills? That’s what the lawyers are for, right? They approve the contracts, why do you need to care?

    Let me tell you a little secret: lawyers aren’t looking out for your interests. They are focused on legal liabilities. Maybe this pictorial will help out:

    Purchasing Training - Legal Liabilities

    Get the picture? And what % of the time are the areas in the overlapping section the ones that are causing your problems after the contract is signed? Something really close to .00000001% of the time.

    That’s right. All your purchasing problems with customers and suppliers is coming from the section on the left. Your section.

    Now I could have made this section on the left an entire book. I did in fact. But I had to stop here due to real estate constraints in this pictorial. The purchasing professional’s list is actually much longer.

    The point is this: almost every problem you waste your day chasing is preventable with a good contract.

    Bad contracts ensure you get “stuff”. Suppliers love to sell “stuff”. The reason is, they give them to you, and their job is done. Onto the next customer. Next!

    Good contracts ensure you buy PERFORMANCE RESULTS. Do you know how to do that? Do you really? Is your idea of a good contract one that is your standard Ts and Cs with the SOW or Specs attached as an addendum?

    If that’s the case, you are in a world of hurt. The standard contract template has no idea what you are buying. It’s just a piece of paper. It wasn’t written to give you very much protection. It’s written to help you buy “stuff”.

    And have you been lead to believe that a contract that has legal approval is a good contract? I’m sure the answer is yes. Well, look at what legal is looking for and tell me if that’s where your daily problems are with suppliers.

    You are killing yourself by lack of contract knowledge!

    It’s causing you to chase unnecessary customer and supplier excursions all day, every day. And is that what you got hired to do? How does that look on your status report? On your annual performance review?

    Are you getting promoted year after year because you put out fires better than anyone else? Highly unlikely.

    Here’s the Opportunity

    • You can be the only one in your department who doesn’t rely on the understaffed and overwhelmed legal department as a crutch.
    • You can be the only one in your department who has lots of spare time because you are modifying the standard contract to be a performance agreement that PREVENTS excursions and has pre-determined remedies for breach of performance.
    • The contract does it’s work while you focus on other more strategic things that actually build your results, your career, and your income. The contract, written correctly, puts 90%+ of your current unplanned daily activities on auto-pilot.
    • You will virtually eliminate supplier redlining.

    What’s that worth to you? You know how many flustered and frustrated purchasing professionals I meet? It doesn’t have to be this way.

    I’ve got a little surprise for you. I’m going to take you this promised land. I’m making you a totally risk-free, unprecedented offer.

    From today through April 1st, you can grab my newest membership training on this very subject for only $97. This is early-bird pricing that is no April Fool’s joke and is $300 off the regular price.

    Here’s what you need to do right now:

    1. Click Here to learn about everything you’re going to get with your membership to have the paradigm shift I’m talking about.
    2. Grab your early-bird coupon code (68d2ad4ea6) to save $300 and get your instant Membership for only $97.
    3. Click the Add To Cart button and you’ll go to a page with a button that says, “Have a coupon? Click here”. Click that button and enter the coupon code and you’ll see the price automatically change from $397 to $97 and proceed to check out.

    Why am I making such a crazy offer? Simple, since this is a new product I need your testimonials. All I ask is that you take the Membership for a full 30 day test-drive. If you love it and experience the new-found freedom and total control over your contract dealings, please send me your testimonial.

    If for any reason whatsoever you don’t like it, just let me know and I’ll refund every penny, no questions asked.

    This new membership program really will set you free from the stress and hassles of contract dealings. You’re going to learn some awesome secrets.

    Click here to find out exactly what you need to do differently, starting now, to put your career on the fast track. You’ll be glad you did!

    I personally guarantee your success, and I can’t wait to hear from you with your success stories.

    Talk to you next week!

    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