Communication is a top skill for supply chain professionals, prized by almost every business in every sector. With the pandemic having changed the ways people connect, we share the latest advice on how to leverage technology to hold better negotiations
Negotiation is required for multiple aspects of the procurement and supply chain journey. A recent McKinsey report recommended that procurement leaders embrace ways to improve supplier-vendor partnerships and co-innovation, develop contracts that incentivise performance, and accelerate digital and analytics adoption – all of which require careful negotiation. However, the post-Covid world – with minimal face-to-face meetings and a reliance on remote communications – is surely affecting negotiations.
Virtual meetings are likely to be the norm for the foreseeable future but this is not necessarily a negative, says Iain Steel, chief procurement services officer at law firm TLT. “When it comes to negotiating in person, there are still benefits to face-to-face meetings but this will not be equal across all meeting types,” he says. “From a business perspective, travel time can often involve poor productivity and increased output cost. From an individual perspective, this can lead to long working days, time away from home and considerations around work-life balance.”
There is, therefore, a necessity to redress this balance. “Where a face-to-face negotiation is deemed likely to deliver only marginal benefits over virtual, this will probably be more of a factor for the foreseeable future,” Steel adds.
Challenges of remote negotiations include extension of contract set-up and agreement timeframes arising from additional sign-offs required by key stakeholders, who might not be involved across the entire negotiation cycle if video call participation is limited. Suren Thadani, managing director on the operational transformation team of Interpath Advisory (formerly KPMG’s UK restructuring practice), says: “This translates into having a sub-optimal view of how a supplier can contribute to realisation of value within the organisation.”
However, some argue remote working has made life easier, says Simon Geale, senior vice-president for client solutions at Proxima. At the most basic level, he says, “most people have had greater availability so have been easier to contact”.
Read the 2D room
The most common mistake is to transfer all meetings from in-person to online with no consideration of the difference. Remote negotiations should be viewed as two-dimensional, says Geale. “You must view this as a constraint, looking at what you can lose but also how you can benefit from it. And in the ‘next normal’, you need to think about how you can use new methods as part of your approach,” he explains.
“More tactically, adjust your team preparation: do as you normally would but also assign two-dimensional roles, look at how you can use conversation and read the room. Think about format: video can be fatiguing but you have more flexibility. You can cut negotiations into shorter exchanges and milestones. Think about how a ‘phygital’ approach can best suit your business and in what scenarios. It’s a new tactic to exploit.”
Business leaders need to be effective listeners in the remote working environment to conduct strong, collaborative supplier meetings and to steer the relationship, says Paul Cooper, director at management consultancy Vendigital. “With higher numbers of short, tactical supplier meetings likely to be the reality for the foreseeable future, businesses also need to focus on planning in advance to ensure they achieve their outputs.”
According to Cooper, businesses are now facing shorter sessions with suppliers so all parties must “be clear about what they want to achieve and how to get there. Businesses must also be diligent about their negotiation follow-up activities.”
Prepare for hard work
While pre-pandemic negotiations focused on improving costs or service levels, critical and strategic suppliers have become more demanding. Thadani says: “They want to know more about committed demand from end customers before committing to any investments on their side, to ensure raw material or supplies are not disrupted. As a result, payment-term negotiations with critical suppliers have become even shorter as they want to operate minimal risks associated with supply and cash.”
Thadani believes far more work should go into remote meetings with suppliers in order to ensure a high level of preparedness and clarity from the supplier. “However,” he continues, this environment has also affected supplier attitudes, with “suppliers thinking out of the box and exploring more value-based relationships”.
Thadani says this can be reduced to three essential skills needed to cope with remote negotiating: “The ability to interpret data and performance better; engaging with internal stakeholders and getting the needs sized up correctly; and thinking deeper about governance frameworks, including elements in the contract that make it more balanced and open to revisiting non-performance, should it occur.”
Keep track of time
Today’s procurement leaders need technical and analytical skills, as well as digital prowess, to build competitive advantage. An important aspect of this is understanding how virtual meetings are affecting expectations of time use. Physical workplaces impose boundaries on people’s time, such as the need to catch a train or simply to move to a meeting room.
But there has always been a general acceptance that the work actually happens in the days following the meeting, says James Crayton, commercial partner at law firm Walker Morris. Now, the removal of those physical boundaries to greater availability has thrown up some concerning trends, such as the expectation of an immediate response. Morris says: “If you’re negotiating on Teams, for example, the meeting often ends with ‘Let’s reconvene at 9am and the document will be ready by then’, so the work must be done overnight.”
Relationship management in a supply chain, and any contract relationship, works around periodic meetings – going through numbers and statistics – and video calls are very effective at facilitating this, Morris says. “In person, you’d grab a coffee with your client or internal counsel for this purpose, so it’s important to keep this element for remote negotiations. WhatsApp groups are also valuable for virtual negotiations to enable you to communicate with clients or with your colleagues during a remote negotiations meeting. The ability to have this internal communication – whether it be in a breakout group or via WhatsApp or similar – is really important to progress negotiations as you would in person.”
Whether it’s using the breakout function during an ongoing call or creating separate rooms on different media platforms, it is important to enable people to hold internal calls amid an ongoing negotiation in order to discuss issues in private. Remote systems offer us more ways to hold negotiations and so the path forward should not be one of replicating our old habits but one of working smarter to test out techniques and tools to hone the art of negotiating.
Top tips for remote negotiations (by Suren Thadani)
- Be clear of your negotiation mandate – what are you asking of the supplier and what can the negotiating organisation commit to?
- For significant negotiations, have regular dry runs with crucial stakeholders participating in remote conversations. Have alternative strategies determined if the supplier rejects the offer or does not agree to the changes suggested.
- Be clear about the negotiation process – following it in a disciplined manner is key to showcasing the importance of the negotiation.
- Test assumptions while formulating a negotiation strategy to ensure contract changes are not frequent and cumbersome for all parties.
- Make yourself visible while having conference calls through videos. Ensure these calls are short and impactful and provide a clear summary of outcomes or actions.