Five Principles of Sourcing – “Commerciality” Must Include Negotiation Skills

We’ve published the penultimate paper in the Five Principles of Sourcing series, produced with support from our friends at complex sourcing technology firm, Trade Extensions. Having covered Coherence, Openness, Rigour and Alignment already in previous papers, this time round we are talking about our final principle, Commerciality.

Our idea was to mimic the philosophies that underpin many of the biggest and best firms in the world. Mars has its own Five Principles; John & Johnson has its credo. We thought it was interesting to consider how procurement professionals might look at the whole area of sourcing, which is so fundamental to procurement success, and define some principles that might inform good practice.

Under “commerciality” we look at a number of issues, including commercial (and competitive) advantage, as well as commercial models and future “network sourcing” opportunities. I know we’re biased, but we think the content is both practical and useful, whilst also making you think a bit!

You can download it now, free on registration, from the Trade Extensions website, along with the three previous papers in the series which cover the other principles. In this extract, we come back to the need for strong negotiating skills as being core to successful sourcing, despite all the advanced technology at our fingertips these days.

 

The Five Principles of Sourcing - Commerciality

Don’t forget negotiation

The previous sections have taken us to the leading edge of sourcing sophistication, with complex commercial models and smart technology that can help to solve the most challenging sourcing (and “beyond sourcing”) tasks in a manner that drives commercial benefits. But we should not forget negotiation.

When we talk about colleagues or others who have a “commercial attitude”, we usually see that as a positive characteristic. Certainly, most procurement leaders would like to see people who fit that description well-represented in their teams. To a large extent, we suggest that what is sought is really a set of advanced negotiation skills.

That skill-set includes: the ability to understand what is possible in a contract and how the other party might perceive those outcomes; strong listening, influencing and communication skills; understanding of how the other party might think and act in the negotiation environment; the ability to assess and manipulate the power positons in commercial relationships; developing and using a strong BATNA.

These are all core negotiation skills and knowledge that should be used when we reach that negotiation stage which comes into play in virtually all sourcing processes, usually most dramatically at the final contracting stage.

That is perhaps a good point to leave this discussion and our five principles.  “Commerciality” covers quite a range of issues and factors, as we have seen. Ultimately it is about gaining competitive advantage from our sourcing processes. If we can achieve that, then that is really the whole point of our sourcing activity.

 (Read more on this topic and others in the paper -  download it now).

First Voice

  1. Trevor Black:

    These are fundamental issues that are at the core of procurement. A major challenge is how they can be reconnected to the public sector where the focus on process out trumps commerciality.

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