With a prolonged period of uncertainty while Brexit terms are agreed, many UK-based businesses are in the process of reviewing supply arrangements and, in some cases, bringing on board alternative suppliers.
The increasing digitisation of procurement processes means buyers have more data than ever to help them in negotiations. Using that data effectively however means negotiations may be won or lost before the procurer even enters the meeting. Advance preparation in three main areas has never been more essential in securing a deal that offers long-term value for both parties:
1. Understand your supplier
Taking steps to understand a supplier’s organisation as closely as possible – their cost base, products, market and competitors – will facilitate a more constructive discussion and help to secure a mutually-beneficial agreement. During negotiations, it is important that businesses maintain an emphasis on supplier performance, ensuring that partners are able to deliver the right value, on time, and whilst making appropriate efforts to mitigate supply chain risk. As well as establishing a mutual, long-term commitment to achieve certain objectives – for example, to facilitate cost efficiencies or improve production methods – buyers should be able to address quality, transactional and performance-related issues honestly and openly.
2. Understand the individual
Making an effort to consider the person on the other side of the negotiating table and their primary motivations for the deal can help buyers to identify whether there is scope to soften the terms of the deal in order to facilitate a conclusion that benefits both parties. If you know what the other person is not prepared to compromise on, this could help to reach a conclusion more swiftly. For businesses trading internationally, it is also important to consider the nuances of different business cultures. For example, in China, a strong emphasis on driving down cost in negotiations could be interpreted wrongly as a willingness to compromise on quality. This type of approach may also increase the buyer’s exposure to risk if they subsequently find there is evidence of slavery and corruption within the vendor’s supply chain. In order to maintain adherence with the Modern Slavery Act, organisations should take steps to find out what is happening right across the supply chain and make sure that suppliers understand fully the standards and practices that they must adhere to; conducting regular, on-the-ground checks.
3. Identify common ground
In order to negotiate effectively, buyers and vendors should aim to establish some common ground. While in the current unpredictable climate it might be tempting for organisations to drive a hard bargain when renewing contracts, this could be damaging in the longer term and may not deliver maximum value from an agreement. By taking a more supportive approach and considering the use of offsets where appropriate, buyers can secure lasting partnerships that are more likely to deliver benefits over the lifetime of the contract.
☛ Paul Adams is a management consultant and industrial sector specialist at supply chain firm, Vendigital.