Purchasing Notes Chap 15

8/11/2019 Purchasing Notes Chap 15

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Purchasing (BMK3748) Diploma in Business Management

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2. Gathering Information and Analysis

Information is power.

Having the right information available when needed is always critical to a successful approach to

strategy formulation.

It is important to know at least as much (perhaps more) about the conditions that may influence

the negotiations as the supplier.

a) Analyzing the Suppliers Situation

In gathering information, you might fist want to consider looking at the situation from

the suppliers point of view:-

What motivates their position?

What are they likely to value the most?

What concession might they be willing to make to achieve their goals?

b)

Analyzing your Organizations Position You will likely know a great deal more about your organization and its specific needs than

you will about your suppliers, so the exercise of gathering and analyzing your own

position will encourage your team to more clearly identify areas where concessions may

be required.

3. Preparing for the Negotiation

a)

Selecting and Leading the Negotiating Team Form a support team composed of technical experts, the financial group, and the

members of the user groupslikely the same people that participated in the preparation

of the RFP and the supplier selection.

This should always be led by senior representative for Purchasing who is participating in

its activities to ensure that business objectives are met and that the negotiations are

conducted in an atmosphere conducive to continued collaboration.

The purchasing representative will also be responsible to ensure the negotiations are

carried out with integrity and in ethical manner.

b)

Assessing the Teams Strength and Weaknesses

It is a good idea for the members of the team to jointly assess its collaborative strengths

and weaknesses in advance.

By doing so, team members will develop a more realistic understanding of the

constraints they are operating under and what technical skills are available to effectively

manoeuvre to a favourable concession.

c) Formulating Objectives and Developing Strategies

As a first step in developing the plan, team members should list the objectives and the

anticipated objectives of the supplier. Under each objective, indicate the likely impact of not achieving the objective.


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Then rank the objectives on the list by priority, focusing on developing strategy for those

that are most critical.

The strategy will outline what initial offer you can expect and what you can counter offer

(also known as take-aways and give-aways.)

Your assessment of the situation, such as current market conditions, will play a critical

role in this process, for without it you will likely not be able to understand the suppliers

need and motivation.

4. Conducting the Negotiation

Climate refers to the physical aspects of where the negotiations are taking place, as well as the

general mood of those conducting the negotiations.It encompasses both the physical atmosphere

and the nature of the personal interaction.

a) Location

It was thought that there was a critical psychological advantage to hold negotiations in a

familiar environment.

Typically, negotiations are held at the buyers office.

If negotiations are conducted at your place, you will have the comfort of familiar ground,

as well as the convenience of having support staff and records nearby.

Regardless where you are, consider any potential negative impact the environment may

have and take whatever steps necessary to counter it.

As part of an awareness of your surroundings, you must also be aware of the bodylanguage and the physical actions of those in the negotiations.

Learning to read these signs can be useful in determining the mood and status of your

suppliers team.

b) Developing a Collaborative Atmosphere

A collaborative atmosphere is the most conducive to negotiate in environments where

long-term relationships are important.

If your discussions are congenial and nonconfrontational and you listen well, you will

come away with an understanding very early in the negotiations of what exchanges of

value can take place.

You will benefit from good relations if you consider that the s uppliers representative is

as anxious as you are to do a good job.

Remember the objective of any negotiation is to reach an agreement, so there is little

value in playing games.

Do not make decisions before you feel completely ready, regardless of the

circumstances.


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c) Allowing for Cultural Differences

When conducting negotiations with personnel from other nations, the most important

rule to remember is that cultural differences will invariably have an impact.

For example: the native speaker may have different conception of the terminology than

the person speaking a second language.

Body language and expressions take on different meanings in different cultures.

The only certain ways for you to understand this is to do homework diligently and

become familiar with as many of the nuances of the suppliers culture as you can.

Sometimes, it helps defuse this potential problem if you take the initial step of informally

discussing these differences together.

5. Adopting a Negotiating Style

2 basic types of negotiator:

Collaborative negotiators who seek to develop outcomes that enhance the sense ofaccomplishment of both parties (win-win situation)

Power (or positional) negotiatorswho seek to prevail in achieving their objectives regardless

of the impact on the other party.

Even after you spend many years in purchasing, it is unlikely you will consistently use one or

the other.

Skills of Negotiations

1. Generally, more can be gained by listening than talking. Accordingly, take copious notes and

review them frequently.

2. Questions how your statements will align with your objectives.

3. Avoid accepting the first offer.

4. Always ask questions, especially when there is useful information to be learned.

5. Do not make concession without receiving equal consideration. This does not necessarily mean

that each and every concession need result in some consideration...but do keep track.

6. Attend to deadlines.

7. Keep your wits about you and avoid reacting emotionally.

8.

Issues need to be prioritized.9. Take breaks whenever you feel the need. Do not attempt to fight fatigue.

10.Refrain from bluffing and use only data you can prove.

11.Last and final offers should mean exactly what they say.

12.Understand and use body language as a communication tool to your advantage.

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Purchasing Notes Chap 15