The Artful Application of Collaborative Negotiations with Providers


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Fortune favors the prepared mind—”luck” in negotiations is actually the result of hard work and good planning. This presentation is for those who seek some collaborative negotiation skills that can be applied for success.

One of your major functions is to negotiate the best terms and price for the materials and services your organization needs to operate. This complex task requires knowledge, tact, superior communication skills, and a solid game

But few people understand that 90% of all negotiations
take place before the involved parties even get to the bargaining table. Collaboration is “in” and compromise is “out” for successful negotiators.
Learn how to make collaboration one of your best negotiating assets and reduce your anxiety as you assume a negotiation comfort level.

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  • Understand that emotional pressures can affect your performance
    Adjust your approach to suit the situation or postpone critical items
    Make cultural adjustments
    When in Rome do as the Romans do
    Be cognizant of non-verbal reactions
  • The Artful Application of Collaborative Negotiations with Providers

    1. 1. The Artful Application of Collaborative Negotiations with Providers 67th Annual SWSMC Conference Track 5 Session C 3 October 2013 Albuquerque, NM Presented by Thomas L. Tanel, C.P.M., CTL, CISCM © 2013 CATTAN Services Group, Inc.
    2. 2. Agenda • • • • • • • The Four S’s Preparation and Planning Three Types of Objectives Remember to Remember Partnering/Alliance Negotiations Agree to Agree Negotiation Tips
    3. 3. The Four S’s: Source • Identify Logistics and Transportation requirements • Gather data and manipulate information • Create a RFI
    4. 4. The Four S’s: Solicit • Develop a RFB/RFP • Send bid/proposal package to qualified sources • Hold a Pre-Bid or Pre-Proposal Conference
    5. 5. 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
    6. 6. 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
    7. 7. 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
    8. 8. 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.
    9. 9. 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.
    10. 10. 3 Secrets of Collaborative Negotiators • Preparation • Preparation • Preparation
    11. 11. 3 Aspects of Preparation Physical – being prepared to withstand the rigors of the process
    12. 12. 3 Aspects of Preparation Emotional – being able to handle personal pressures
    13. 13. 3 Aspects of Preparation Technical : • Understanding the process • Having a plan
    14. 14. Three Types of Objectives
    15. 15. Primary Objectives--Deal From Strength The successful negotiator deals most The successful negotiator deals most effectively when he/she has identified effectively when he/she has identified his/her strongest points and uses them his/her strongest points and uses them strategically .. strategically
    16. 16. Secondary Objective— ”How To” Establish Maximum Supportable Position (MSP) Best Possible Scenario TARGET Position Least Acceptable Scenario Minimum Acceptable Position (MAP)
    17. 17. Setting the Target and RangeSecondary Objective Max High Min Their Objective Their Range Price Terms Quality Delivery Service Etc... Your Range Your Objective Min Low Max
    18. 18. Negotiation Targets for Secondary Objectives–Format of Conditionality • What You Want • What You Offer in Return • If you give me • Then I will give you Example: “ If you make it a 97 % service level, then we will incentivize you for each % above.”
    19. 19. Concessions—Tradable Objective Tradables are very useful objectives that allow the negotiator to make or gain concessions without harm to the plan. Tradables are valuable items to be used to gain your desired Primary or Secondary objectives. People who are uneasy People who are uneasy will grant concessions to will grant concessions to extricate themselves from extricate themselves from an uncomfortable an uncomfortable situation. situation.
    20. 20. 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.
    21. 21. The Essence of Negotiation
    22. 22. Remember to Remember
    23. 23. Four Rules to Guarantee Success 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
    24. 24. 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-collaboration Better provider performance Improved communication Increased industry and functional knowledge Increased trust and reliability Reduced adversarial relationships
    25. 25. 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.
    26. 26. 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.
    27. 27. 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.
    28. 28. 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.”
    29. 29. Concluding Negotiations • Have a Memorandum of Agreement or Memorandum of Understanding • Be careful not to make it a contract • Insert a special protection clause
    30. 30. 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
    31. 31. 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
    32. 32. Collaborating with Others-FAB
    33. 33. Collaborating with Others-
    34. 34. Collaborating with OthersSeek Rapport
    35. 35. Raise Your “Eye-Q”
    36. 36. 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.
    38. 38. Agree to Agree Agree to agree .. .. .. Agree to agree This pre-frame This pre-frame focuses everyone on focuses everyone on collaboration and collaboration and problem solving problem solving rather than posturing rather than posturing and positioning. and positioning.
    39. 39. 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.
    40. 40. 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.
    41. 41. Use NAL with Emotional Factors
    42. 42. The Essential Principle of Negotiations—LINKAGE LINKAGE Never Give Up Something without Getting Something in Return Avoids a Bad Deal
    43. 43. Asking Effective Questions “You can tell whether a man “You can tell whether a man is clever by his answers, you is clever by his answers, you can tell whether a man is wise can tell whether a man is wise by his questions.” by his questions.” —Naquib Manfouz —Naquib Manfouz
    44. 44. Five Functions of Questions 1. Cause Attention. 2. Get Information. 3. Give Information. 4. Start Thinking. 5. Bring to a Conclusion.
    45. 45. 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?”
    46. 46. 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?”
    47. 47. 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.
    48. 48. How Do I Ask Effective Questions? Effective questions are open ended: • Ask for stories, background, and interests • Ask “Why” questions • Ask for speculation
    49. 49. Negotiation Tips
    50. 50. Tips for Better Negotiating • • • • Write down in advance your “walkaway” position. Understand your supplier counterpart’s emotional issues. Understand your supplier counterpart’s real objectives. Never bluff! Be prepared to back whatever you say.
    51. 51. 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.
    52. 52. 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.
    53. 53. 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
    54. 54. SUMMARY and THANKS © 2013 CATTAN Services Group, Inc.