Negotiating From a Position of Strength

Anyone with fifteen minutes to spare this week should sit down and take a close read of Mark Trowbridge's excellent analysis on improving negotiating leverage in Supply Chain Management Review. This is one of those once in a quarter articles where the Cliff Notes or a quick skim will not suffice. Spend the time and read all of it for yourself. In it, Mark presents seven ways of improving your negotiating strength, nearly all of which are relevant across industries (although anyone involved in manufacturing will want to take an even closer look at a few of the suggestions). If you begin with the premise he quotes from Benjamin Franklin that "Necessity never made a good bargain," then we need to take action to improve our operating leverage. The difference in some of Mark's techniques relative to others you might read about is that they're aimed at changing the basis of negotiation rather than simply improving the negotiation itself. "That's because these techniques can alter a supplier's perception of your relative strength in the negotiation process," according to the article.

Perhaps the best summary argument in the entire piece comes in the form of Technique 3: Prepare the Team to Fight the Tough Battles. Here, Mark writes that "when my firm trains supply management groups in advanced negotiation strategies, we drill home the principle that 75 percent of negotiation time should be spent outside of the room -- that is, in researching data to be used in negotiation, preparing negotiation strategy, planning team member roles, taking caucus breaks, and so on. Put another way, you need to follow the Boy Scout motto of 'Be Prepared'." So remember: whether you improve your hand from "negotiating all TCO elements before entering into a relationship" (Technique 5) or "conducting should-be cost analyses" before confronting your suppliers (Technique 4), be sure to invest the majority of your negotiation time prior to even starting a back and forth with your suppliers. Ironically, this was a lot of the thinking behind the extensive preparation for early reverse auction approaches at GE and FreeMarkets before the concept got lost in a fast pounding auction gavel.

Jason Busch

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