The Artful Application of Collaborative Negotiations with Providers

The Artful Application of Collaborative Negotiations

with Providers67th Annual SWSMC Conference

Track 5 Session C3 October 2013

Albuquerque, NM

© 2013 CATTAN Services Group, Inc.

Presented by Thomas L. Tanel, C.P.M., CTL, CISCM

Agenda

• The Four S’s

• Preparation and Planning

• Three Types of Objectives

• Remember to Remember

• Partnering/Alliance Negotiations

• Agree to Agree

• Negotiation Tips

The Four S’s: Source

• Identify Logistics and Transportation requirements

• Gather data and manipulate information

• Create a RFI

The Four S’s: Solicit

• Develop a RFB/RFP

• Send bid/proposal package to qualified sources

• Hold a Pre-Bid or Pre-Proposal Conference

The Four S’s: Select

• Verify documentation submitted

• Establish T&Cs that may require adjustment, compromise or negotiation

• Analyze bid or proposal submissions

• Develop selection criteria or negotiation strategy

• Select or conduct negotiation

• Execute Memorandum of Agreement or Understanding

The Four S’s: Secure

• Provide contracts to selected 3PLs and/or carriers

• Emphasize Long Term Relationship• Monitor 3PLs’ and/or providers’

performance, costs and commitments• Seek continuous improvement and

incorporate feedback to and from • Hold IPRs and provide a performance report

card on a regular interval

Preparation and Planning

• 90% of all negotiation takes place prior to actual negotiation

• The best defense is a good offense!

• Luck is the residue of hard work and good planning

Planning for the Negotiations—The Scope

Let the complexity, value, risk,

and importance of the provider’s

service to be negotiated determine

the scope of your negotiation.

Collaborative Negotiation Planning Focu$

• Focus on Pareto’s Law—20% of your

outsourcing providers constitute 80% of your

total outsourced dollar spend.

• Focus on alliances, partners, and preferred

providers.

• More extensive negotiations are appropriate for

higher dollar value procurements, because the

dollar savings are potentially larger.

3 Secrets of Collaborative Negotiators

• Preparation

• Preparation

• Preparation

3 Aspects of Preparation

Physical – being prepared to withstand the rigors of the process

3 Aspects of Preparation

Emotional – being able to handle personal pressures

3 Aspects of Preparation

Technical :

• Understanding the process

• Having a plan

Three Types of Objectives

Primary Objectives--Deal From Strength

The successful negotiator deals most

effectively when he/she has identified

his/her strongest points and uses them

strategically .

The successful negotiator deals most

effectively when he/she has identified

his/her strongest points and uses them

strategically .

Secondary Objective—”How To” Establish

MinimumAcceptable

Position (MAP)

MaximumSupportable

Position (MSP)

Best PossibleScenario

Least AcceptableScenario

TARGETPosition

Setting the Target and Range-Secondary Objective

TheirObjective

YourObjective

TheirRange

YourRange

High

Low

PriceTerms Quality

Delivery Service

Etc...

Max

Min

Min

Max

Negotiation Targets for Secondary Objectives–Format of Conditionality

• What You Want

• If you give me

• What You Offer in Return

• Then I will give you

Example: “ If you make it a 97 % service level, then we will incentivize you for each % above.”Example: “ If you make it a 97 % service level, then we will incentivize you for each % above.”

Concessions—Tradable Objective

People who are uneasy

will grant concessions to

extricate themselves from

an uncomfortable

situation.

People who are uneasy

will grant concessions to

extricate themselves from

an uncomfortable

situation.

Tradables are very useful objectives that allow the negotiator to makeor gain concessions without harm to the plan. Tradables are valuable items to be used to gain your desired Primary or Secondary objectives.

Concessions—Trading Off

By asking for something in return,

you’ve elevated the value of the

concession. When you’re negotiating,

why give anything away? When you

elevate the value of the concession,

you set it up for a trade off later.

The Essence of Negotiation

Remember to Remember

1.   Learn to be comfortable not knowing

2.   Learn to ask questions

3.   Operate with a high degree of ethics

4.   Seek an even exchange

Four Rules to Guarantee Success

Negotiations and Provider Relationships

• The traditional price-based relationship with providers is changing to long-term relationships based on total cost, trust, flexibility, innovation and quality.

• Advantages:Stronger partnering-collaborationBetter provider performanceImproved communicationIncreased industry and functional knowledgeIncreased trust and reliabilityReduced adversarial relationships

Understanding Collaborative Purchasing Negotiations

• There is a common notion—even among some experts—that someone always gets skinned in a negotiation.

• In purchasing negotiations this should never be the case---collaborate don’t compromise.

Understanding Collaborative Purchasing Negotiations

• Power of Persuasiveness. In order to bring a seller to agreement with your view, you need to:– Make sure he/she understands what you are

saying. – Present compelling facts and information.– Meet his/her needs.

Understanding Collaborative Purchasing Negotiations

• Power of Solidarity. A united front to counter “Divide and Conquer” tactics: – Particularly needed when negotiating in teams. – Teams that are not united can weaken our

negotiating position because they make foolish remarks.

– Avoid careless remarks that may weaken your negotiating position.

Understanding Collaborative Purchasing Negotiations

• Power of Competition. Examples of “Foolish Remarks” that let a Seller know they have little or no competition:– “Your level of service is the only one that will do.”– “We really like yours best.”– “As far as we can determine, you’ve got the only type of 24/7

service available.”– “Your competition can’t handle it right now.”– “We’ve had nothing but trouble with your competition.”– “I understand we always get these from you.”– “You’re the only one providing this type service.”

Concluding Negotiations

• Have a Memorandum of Agreement or Memorandum of Understanding

• Be careful not to make it a contract

• Insert a special protection clause

Partnering/Alliance Negotiations--Collaboration

• Add value to the other

• Be supportive

• Avoid surprises

• Be open & above board

• Frame of reference

• Anticipate opportunity

• Anticipate problems

• Do your homework

• Treat each other as people

Four Rules of Collaborative Negotiations

1. Negotiate decisions in which both parties benefit

2. Establish guidelines and an agenda

3. Invent options

4. Insist on objective criteria

Collaborating with Others-FAB

Collaborating with Others-

Collaborating with Others-Seek Rapport

Raise Your “Eye-Q”

Reading People—Part I

• It can be done based on a sound principle of nature.

• By understanding how the brain and body react in

certain situations, you can train yourself to decode the nonverbal messages people

unwittingly transmit.

Reading People—Part IIFive Ways to Read People

1. MISMATCHED GESTURES

2. TONE SHIFTS

3. AVOIDANCE or OVERFRIENDLINESS

4. FALSE SMILES

5. EYE DARTS

Agree to agree . . . This pre-frame

focuses everyone on collaboration and problem solving

rather than posturing and positioning.

Agree to agree . . . This pre-frame

focuses everyone on collaboration and problem solving

rather than posturing and positioning.

Agree to Agree

Definition of Three Negotiation Terms for Collaborative Negotiations

An Impasse is when you disagree on a major issue and it

threatens the negotiation.

A Stalemate is when you and the supplier or contractor are still

talking but you seem unable to make any progress toward a solution.

A Deadlock is when the lack of progress has frustrated both sides

so much that neither you nor the supplier or contractor see any point

in talking to each other.

Breaking Deadlocks—Five Ploys

1. Focus on the problem.

2. Turn a problem or contentious issue into an answer.

3. Reduce the scope of the issue

4. Take a break, recess, or caucus.

5. State the other side’s case.

Use NAL with Emotional Factors

The Essential Principle of Negotiations—LINKAGE

LINKAGE

Never Give Up Something without Getting Something in Return

Avoids a Bad Deal

Asking Effective Questions

“You can tell whether a man is clever by his answers, you can tell whether a man is wise by his questions.”—Naquib Manfouz

“You can tell whether a man is clever by his answers, you can tell whether a man is wise by his questions.”—Naquib Manfouz

Five Functions of Questions

1. Cause Attention.

2. Get Information.

3. Give Information.

4. Start Thinking.

5. Bring to a Conclusion.

Use Questions Collaboratively in a Socratic Manner

• Devise a question or series of questions whose answers will lead to the answer that you need.

• Example: “How do you think your senior management will respond to our facility layout change?” instead of, ‘Don’t you think you should of checked with your senior management before we discussed this issue?”

Use Questions Collaboratively in a Socratic Manner (Con’t)

• Do not ask questions in a condescending manner, a manner that implies, “See if you can guess the answer.”

• Instead, try “what if “ phrasing: “What if you were to change the mode of transport?”

Why Should I Care About How I Ask Questions?

• The more information you have, the better decisions you’ll be able to make.

• How you ask a question can have just as much impact as the words you’re saying.

• You want it to be as easy as possible for people to share information with you.

How Do I Ask Effective Questions?

Effective questions are open ended:

• Ask for stories, background, and interests

• Ask “Why” questions

• Ask for speculation

Negotiation Tips

Tips for Better Negotiating

• Write down in advance your “walk-away” position.

• Understand your supplier counterpart’s emotional issues.

• Understand your supplier counterpart’s real objectives.

• Never bluff! Be prepared to back whatever you say.

Tips for Better Negotiating

• Be patient. Learn how to handle silence during a negotiation.

• Never permit debate and disagreement to become personal—stick to the issues.

• Try to find items to trade (concessions) that are more important to the other side than to you.

Tips for Better Negotiating

• Do not be constrained by the specific scope of what is being negotiated; collaborate and mutually invent options.

• Negotiate only with supplier counterparts who have the authority to close or consummate the agreement.

• Never give up! Learn to distinguish among an impasse, a deadlock, or a stalemate.

Negotiating the Contract and the Conduct of a Collaborative Negotiation

• Emphasize the Four S’s

• Do prepare and plan

• Set objectives and ranges of acceptability

• Establish roles and authority

• Listen to and explore the supplier’s position

• Focus on the key issues, ask questions

• Seek a fair, collaborative agreement

• Record results as compared to the plan

• Perform final actions

SUMMARY and THANKS

© 2013 CATTAN Services Group, Inc.