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Supplier Negotiation Strategies, Pt 3: Location Control Strategy

Purchasing Training ~ Supplier Negotiations
Don’t Split the Pie!

So we are talking about supplier negotiation strategies. This is a counter-intelligence series.

Instead of talking about what strategies are in the purchasing arsenal, we are talking about what is in the supplier’s arsenal.

In doing so, we will learn how to anticipate and respond to such tactics. It’s a critical skill. Recognize though that I can only go so far in a blog.

My online training solutions and face to face seminars are what provide true “deep dive” analysis.

Let’s say you go to a virtual stranger’s house for dinner, somebody you’ve recently met and don’t have an established comfort level with.

How does that feel? Are you comfortable opening their refrigerator? Their food cabinets? Strolling to the restroom without asking permission first? How about taking a spin in their car?!! None of that is very comfortable.

Well, suppliers are no different. They don’t like having negotiations at your office or facility. It’s not comfortable for them. On top of that, there’s a lot more than dinner on the line – their entire financial livelihood is on the line!

So it should be no surprise that suppliers want negotiations to happen at their facility. Of what benefit is this to suppliers? Let me count the ways.

There are logistical benefits. Access to conference rooms, free access to roam the facilities, access to hard copy files, and so on. There is also control of the agenda and what gets covered.

There are psychological benefits. Suppliers are in their “house”. They are comfortable. Relaxed. At ease. They are intimately aware of and in control of their surroundings. They can also overwhelm you with large numbers of people from their end, and they can even control where you sit.

There are human resource benefits. Suppliers can access anyone they want, in person and on the spot. They can also decide who attends and who does not, and where and when they attend.

There are schedule benefits. Suppliers can control the schedule and cadence of activities, who attends, and what gets discussed – and what doesn’t.
Don’t underestimate the importance of these factors. And suppliers work very hard to get them to work to their advantage.

However, suppliers are also very smart. They will never actually say “let’s negotiate at our facility” (unless they are completely untrained).

What they say instead are things like this:

“This deal is unprecedented. Our COO wants to personally meet you. We’d really like to have you at our facility, as a sign of our commitment to making you and your company successful.”

“We run world class manufacturing lines, and we really want you to see them. We’ve arranged for a VIP tour of every facet of how we run them. You can bring your engineers too.”

“I want to put every resource at your disposal. I have players in operations, manufacturing, planning, and logistics that I want at your beck and call. I can’t fly them all to your facility – it just wouldn’t make sense – but I have arranged for them all to block out their schedule to have a full day dedicated just to meeting your needs and requirements.”

All of these are comments that are designed to make you think going there is all to your benefit. And since they own the agenda, they will naturally work negotiations into them.

Do you want to hear a story?

In my first year as a purchasing professional, I naively agreed to meet at a supplier facility. The goal was not to enter into negotiations, but location control allowed the supplier to work that in.

This was a Fortune 50 company we were meeting. No games were expected.

It was me and my engineering manager, who was my customer. The day was packed. We were moved like sardines in a packing facility from one room to another, jumping from one topic to another.

Every meeting was packed with strangers, all of them evidently important to these discussions, but none of them saying much. It was all a part of their strategy.

When it finally came time for negotiations at the end of the day, we were both tired from the whirlwind of activities. They had put us in a large and long room. They managed to separate me from my customer, and he sat far away, so I couldn’t even confer with him. I was alone on an island.

The VP of Marketing sat in the “power position” at the end of the table, and bellowed across to me, where I was sitting off on the side, surrounded by his employees, where I was barely even able to make eye contact with my own customer.

Where was my finance manager? My go-to-guy in engineering? My logistics person? My laptop and all my files? None of them where there, because we were there for a “VIP tour”. They weren’t needed. But there I was in a negotiation room.

All the forces were working against me. Somehow, despite my lack of experience, I realized something was very, very wrong. I got my wits about me called the negotiations to a halt. I told them that negotiations would resume at our (my) facility and I would let them know then.

If this strategy doesn’t work, suppliers will then say “let’s do this fair for both sides, let’s pick a location neutral location”. They are trying to say that the pie should be split down the middle to make it fair for both of you.

The problem is, this isn’t their pie to split. This is your pie. YOU are the one with the money, and they are only one of a parking lot full of suppliers trying to get it. They don’t have rights to split the pie. They don’t even get to pick what type of pie it is.

Do not pick a neutral location for negotiations, and if it can at all be avoided, do not negotiate at a supplier’s facility. Separate the issues.

If you need to do a manufacturing tour, then separate that from negotiations, and hold the negotiations back home. They are two different things. There is no need to “kill two birds with one stone”, because one of those birds will be you!

Next week, we will talk about “Supplier Time Pressures” as a supplier negotiating strategy.

Meanwhile, Click this link and join our Power Purchasing Pro Group now. You’ll be glad you did!

Be your best!

Omid G