Negotiations are among the most essential (and potentially frustrating) stages of the sourcing process. While researching the market and distributing RFx documents can teach organizations a lot about the supply base, negotiations are often where the real lessons are learned. It's at this all-important stage that suppliers start to reveal their true willingness to enter a strategic partnership. A supplier who remains communicative and collaborative throughout the process will likely prove an exceptional ally once you've reached an agreement.
There are entire books dedicated to negotiation strategies. Advising readers on identifying leverage points, entering conversations with confidence, and reaching an agreeable compromise, they've got best practices to spare.
According to Senior Project Analyst Jennifer Engel, however, the discussions around negotiations rarely touch on one very important topic. She writes, "What these strategies fail to address is when to understand that furthering a conversation is a waste of resources." Though negotiation tips and tricks are published almost daily, few help Procurement recognize when it's best to accept an agreement "as is" or even walk away from the table altogether.
Engel joins the Source One Podcast to fill in this gap. Leveraging her years of successful, strategic negotiations, she presents a number of scenarios in which Procurement should call it quits. If, for example, a supplier has grown unresponsiveness, it's safe to assume they've checked out of the conversation. Whether Procurement should accept the current terms or walk away will depend on their category and objectives, but it's clear that reflection and action are necessary.
However negotiations proceed, Engel recommends leveraging the process as a "trial run" of sorts. A suppliers behavior throughout the process suggests a great deal about how they'll perform as a business partner. Knowing when to conclude negotiations could keep your Procurement team from aligning itself with a stubborn, non-communicative, or overly rigid provider.
Listen to the full episode today.