Leading edgesupplymanagemented1 april2011

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  • 1. Volume 1, Issue 1

2. Page 2Welcome!From Next Level Purchasing Association Founder Charles Dominick, SPSM, SPSM2Welcome to Leading-Edge Supply Management! Im excited to share with you the inauguralissue of the official online magazine of the Next Level Purchasing Association.In this issue of Leading-Edge Supply Management well focus on the topic of negotiation, a veryimportant skill for todays purchasing professional. You can expect upcoming editions of themagazine to include educational articles and tips; purchasing and supply chain vacancies;commodity indices; news on upcoming member events; and more!Due to our green initiative, Leading-Edge Supply Management will only be available in anelectronic format, but I encourage you to download a copy and reference the articles as needed.After all, this is a great educational resource that contains tips you can use to help make yourjob easier!So, lets get started!To your career,Charles Dominick, SPSM, SPSM2 Using Collaboration In Negotiation: 3 Steps How Can You Collaborate When You Negotiate?Win-win negotiation uses collaboration as opposed to confrontation as the basis for persuasion. In some negotiationswhere you and your supplier have opposite positions on an issue, you may think that there is no opportunity forcollaboration. But there usually is if you use these three simple steps:1.Have both parties share what their interests are. In our online class "Powerful Negotiation For Successful Buying,"we teach that an interest is a need that you desire to have satisfied and a position is one scenario that could satisfy aninterest. For example, a supplier may have an interest in making a 20% profit margin on its sales to your organizationand its position will be that it wants to charge $5.00 per unit. Your interest may be that you achieve a 10% costsavings and your position is that the supplier should reduce the price to $4.50. If youve reached an impasse, it can bemore effective to discuss interests rather than argue over positions.2.Brainstorm to identify several possible solutions. After interests have been discussed, ask the supplier to workwith you to come up with multiple scenarios that would enable both parties to achieve their interests. The goal is notto come up with the perfect solution just yet, but to gather several different ideas that can be later pared down. Dontfeel the pressure to do all the talking. Sometimes, a supplier can come up with a good idea and they will be more likelyto buy into it - or at least reluctantly honor it - if they come up with it as opposed to you imposing it on them. Forexample, the supplier may say "I could get the price down to $4.50 if you opted for a single material packaging insteadof a two-material packaging. Id still make 20% because my costs would be lower and youd achieve your savings."3.Jointly select the best solution. After brainstorming, you may have to whittle down some of the suggestions that justdont work. But, hopefully, youve come up with several potential solutions that accommodate both parties interests.Together, you and the supplier should select one that makes the deal feel like a "win" for both parties. Using Collaboration in Negotiation: 3 Steps by Charles Dominick, SPSM, SPSM2 was originally published in Edition 219 of PurchTips.Leading-Edge Supply Management is published monthly by Next Level Purchasing Association as a free benefit to association memb ers. If youve received acopy of this magazine from someone rather than downloading it directly from the Next Level Purchasing Association, you can si gn up for a free associationmembership to have access to this and other free benefits. Just visit http://www.NextLevelPurchasing.com/nlpamag and submit your name and emailaddress to join the Next Level Purchasing Association. Reproduction of this magazine in whole or in part without written perm ission by Next Level Purchasing isstrictly prohibited. All rights reserved. 2011 Next Level Purchasing, Inc.April 2011 Volume 1, Issue 1 3. Page 3 In this Issue:2Using Collaboration In Negotiation: 3 Steps3Negotiation, Ethics, & You4Negotiating After "No"5SPONSOR ADVERTORIAL: Critical Alert! Is Your Fleet Supply Chain Management on Track?6A View From the Field: Implementing a Supplier Quality Manual to Execute Supply Strategies7A 21-Point Negotiation Checklist8Use Negotiation Skills To Elevate Purchasing SPSM Certification Question of the Month9Price and Commodity Indices10 Procurement Vacancies11 Certification and Training Spotlight12 Beyond the tips. Is your negotiation recipe missing an ingredient? The Future of Negotiation: Texting?Negotiation, Ethics, & YouHow Do You Persuade Your Suppliers?If you are like most purchasers, you are under pressure The Cheap Date - Despite the fact that he isto generate lots of cost savings. Unfortunately, the engaged in a negotiation situation with thepressure to boost the bottom line compels some lesssupplier, The Cheap Date will accept meals,skilled purchasers to cross the ethical line. They use entertainment, and/orquestionable techniques. gifts at the suppliers expense. Even if suchThere are five common ethics-related profiles of acceptance does notpurchasing negotiators. Which describes you? actually influence The The Liar - The Liar will tell any number of lies to aCheap Dates decision-supplier to persuade that supplier to improve itsmaking, it creates theterms. An example of a lie would be telling aperception within Thesupplier that another supplier has a price that is Cheap D a t es Are you employing an ethical negotiation strategy?10% lower when such a statement isnt true.organization that he isUNETHICAL! being "bought." UNETHICAL! The Exaggerator - The Exaggerator might not tell an The Professional - The Professional considersoutright lie, but her words and behavior may beethics when negotiating. She knows thedesigned to trick a supplier into thinking that acharacteristics of the other four profiles andlarger quantity or longer term contract is to be consciously avoids that type of behavior. And sheexpected. The Exaggerators intent is to get a betterdoes a great job of negotiating, too!price and not follow through with implied quantityThere are so many effective ethical negotiationor term commitments. UNETHICAL!techniques available. You should never have to resort The Open Book - The Open Book will give a supplierto the practices of The Liar, The Exaggerator, The Openinformation about competitors proposals in order Book, or The Cheap Date to get the results you want.to persuade a supplier to offer a better deal. Ofcourse, the competing suppliers expect theirNegotiation, Ethics, & You by Charles Dominick, SPSM, SPSM2 wasproposals to be kept confidential. UNETHICAL! originally published in Edition 72 of PurchTips.April 2011 Volume 1, Issue 1 4. Page 4Negotiating After "No"How Do You Respond When Your Supplier Says No? One of the strongest negotiation techniques your suppliersuppliers upstream costs. can use is to simply say "no." Your ability to distinguish a real "no" from a "no" used as a negotiation technique is Paint A Picture - Sometimes suppliers need help vitally important. These tips will help you move past theunderstanding the implications of not reaching first few nos and negotiate a better deal.agreement. Explain the importance of your business totheir bottom line. Describe what their business might Shift Focus - Try to shift focus onto another item of value if look like 2 or 3 years out if they lose this deal or if the youre at an impasse on a particular negotiation point.relationship is damaged. Ask how this future state Negotiate a longer warranty period. Ask for some freewould affect their personal performance review, products or accessories. Gain agreement on firm pricingcareer or compensation.for a longer period oftime, a downward priceChange Players - Insisting on the involvement of aprotection clause, better higher-level supplier representative in the negotiationlead-times, or seek might seem elementary, but many negotiators messgreater discounts onthis one up. The trick is to find the highest levelrelated (or unrelated)executive who would experience the greatest pain atgoods or services.the loss of your business. Aim too high and your pleasDont let a suppliers no spell the end a deal. may not be treated as high priorities. Done correctly, Do The Math - Set emotions aside and walk your supplieryour contact will help you fight within the suppliers through the business problem you both face. Develop aorganization. "should cost" model to determine if there is room for additional cost compression. Benchmark the offer youve received against published industry data from consultants, Negotiating After No by Charles Dominick, SPSM, SPSM2 was trade organizations, etc. Offer to analyze and help reduce originally published in Edition 175 of PurchTips.As you probably already know, negotiation is a necessary skill for success in purchasing. As a matter of fact your peershave rated it as the most important skill during an annual purchasing survey in each of the last five years. Unfortunately,many procurement professionals feel that their past negotiation experience will serve them well today. Guess what?Much has changed and supplier-friendly win-win negotiation is the new standard. You have less preparation time thanever. You may even get lured into using the convenient, but often ineffective, method of negotiating by email. If it seemslike youre at a disadvantage, you are!But you can quickly get the modern procurement negotiation strategies and skills you need to get the best deals intodays environment. Next Level Purchasings highly personal and interactive online course Powerful Negotiation ForSuccessful Buying will teach you the latest and greatest procurement negotiation strategies so that even the most savvysellers will give you the best deals possible.And better yet, Next Level Purchasing Association members can rec