Spend Matters welcomes a guest post from Mason Lee, Manager, and Matt Kucharski, Sr. Consultant, at The Hackett Group.
From 1983 to 1987, The A-Team delivered five seasons of action-packed episodes to its cult following. The ex-U.S. Army Special Forces unit, turned mercenaries, were constantly on the run for a "crime they didn't commit." The four "soldiers of fortune" who were Colonel John "Hannibal" Smith, Lieutenant Templeton "Face" Peck, Captain H.M. "Howling Mad" Murdock, and Sergeant First Class Bosco "B.A." Baracus. The sitcom has left its mark on popular culture through its iconic van and catchphrases. But the creators of the A-Team were unlikely to be aware that they were also providing us with valuable lessons in supplier negotiations.
Supplier negotiations are a critical step within the strategic sourcing process. After profiling a category, developing sourcing strategies, and engaging the market, it is time to more personally engage your potential future state supplier(s). The Hackett Group's point of view on strategic sourcing negotiations is that it is a team effort. Your A-Team should be comprised of individuals with different skill sets in order to increase its strength and ability to adapt.
"Face" - The Frontman
"Face" had a knack for making friends everywhere. He was the master of the win-win, excelled at breaking the ice, and had an ability to get both parties feeling good. On your negotiations team, "Face" is the persuader and consummate influencer. Use your team's "Face" to open up the meeting and set the tone. Or, when negotiations get rocky, consider channeling your inner "Face" to diffuse the situation.
"Face" also scrounged up whatever resource the team needed no matter where they were. You can apply this invaluable ability in business. When negotiating with incumbent suppliers, chances are that there are opportunities for you to become a better customer. Give your incumbent the opportunity to constructively communicate what is not working optimally and then send your "Face" in to locate a solution.
We had a negotiation in which our supplier and buyer were equally frustrated with each other (to the point of shouting and nearly ending the relationship) because the supplier was missing orders and the buyer's orders kept changing. Our "Face" intervened, calmed everyone down, and eventually helped the supplier revise its planning systems while also going back into her buying organization and securing commitments to provide better forecasts.
"B.A." Baracus - The Muscle
When all else fails, sometimes you need to bring the pain and, to do that, you are going to need some muscle. "B.A." pities the fool who takes NO for an answer. At the negotiations table, people often have a tendency to stop when they first hear that word. If you want to maximize the result of your negotiation, be sure to bring your "B.A." His role on the mission is to handle challenging topics like price. Just make sure that you have enough ammo (fact-based analysis) to give him the confidence to negotiate aggressively.
While supporting our client through their negotiations with a major hotel chain, both parties were far apart on price. The hotel representative continually stated that the room rates offered were the best they could do and insisted that they did not have visibility into our client's historic spend and stay volume. Armed with analysis, our "B.A." presented the client's historic data and proved more aggressive pricing was warranted if the chain desired to keep the business. As a result of providing proper ammo and "B.A's" inability to take no for an answer, an incremental 15% savings was achieved.
"Howling Mad" Murdock - The Unconventionalist
In many circumstances, it is impossible for a sourcing professional to know as much about the category in question as the subject matter expert they are supporting. In these circumstances, do not be afraid to bring in "Howling Mad" Murdock, your subject matter expert, to help you develop a creative approach and gain credibility as a result of their knowledge. Since some subject matter experts may not be experienced in negotiations, it is valuable to conduct a preparation session with the individual in order to gain alignment on the objective; if you just turn them loose, you never know what may happen.
During the course of lengthy negotiations between our client and HVAC providers, progress was at a standstill. Our client was facing an increase in equipment pricing from all engaged providers. Out of conventional options, our "Howling Mad" Murdock saw an opportunity to expand the scope of the negotiations and bring HVAC services into the mix. By combining equipment and services, our client was able to contract with a single supplier for all their needs and realize 20% in savings.
Hannibal - The Tactician
During the course of negotiations it is important to observe and proactively modify your plan based upon the actions of the supplier. "Hannibal" knows how to do this best. After establishing your preliminary strategy, it is crucial to be able to modify your ground-game based upon what you observe. Is a supplier representative highly analytical? Time to bring out the reports and quantitatively demonstrate where you stand. Is the supplier agreeing to everything? Maybe you have not asked for enough and need to recalibrate.
During negotiations with a German-based metals supplier we hosted, company representatives clearly believed they had won the business, were stonewalling, and were engaging in side conversations at the table. Our "Hannibal" knew it time to act, calling for a break. During the pause in action, the team revised tactics and sent in the Sr. VP (who had been previously quiet) with a stern message and strong proposal. Our "Hannibal" also decided that only the Sr. VP should speak while the rest of the team remained silent and stoic to reinforce the seriousness of the proposal and shutdown cross-talk. The result of "Hannibal's" plan was an additional savings of $500K.
The next time you reach the point of supplier negotiations it is of the highest importance that all planning, strategizing and due diligence have been completed before attempting to channel the characteristics of the A-Team. A great negotiations team should have the ability to leverage the expertise of "Hannibal," "Face," "Howling Mad," or "B.A." in order to capitalize on the unique elements that arise. At the end of the day, you'll "love it when a plan comes together."
Mason Lee has 7 years of experience in management consulting & professional services. His past engagements have focused on strategic sourcing, change management, best cost country sourcing, logistics, SRM, and alliance implementation. Mason has directed multiple large global teams and has experience in a wide range of industries including: banking, energy, fluid conveyance, healthcare, material handling, mining, and refrigeration. He is practiced in partnering with executive management to affect change in supply chain organizations. He specializes in the sourcing, implementation, and management of complex, highly technical, direct material categories.
Matt Kucharski is a Consultant in the Strategy and Operations Practice at Archstone Consulting. Matt has experience in Spend Analysis and Opportunity Assessment, Strategic Sourcing, Supplier Evaluation and Implementation, Ariba Spend Management Solutions, and Service Delivery Model (SDM) design. His industry experience focused on the strategic sourcing of Indirect products and services. Matt's recent consulting experience has focused on the execution of the 7-Step Sourcing Process for Indirect and Direct spend categories and SDM design.