The problem with procurement is that many buyers are looking at learning strategies and techniques about how to negotiate with suppliers rather than understanding what to negotiate with suppliers in the first place. When you understand what to negotiate and then make it the focus of all your negotiations, the 'how' is less important.
We are not saying that learning how to negotiate with suppliers is not important, all we're saying is that what to negotiate with suppliers is more important and comes before the 'how'.
What to Negotiate is More Important Than How to Negotiate with Suppliers!
A buyer must understand that he is not buying goods or services, so as a buyer you are not negotiating for goods and services. A true procurement professional does not buys goods or services, he buys results.
That's why when negotiating with suppliers a buyer negotiates for performance results. The fact that we're negotiating for goods and services, sounds like a good thing, but what's actually happening is, when you buy goods and services is that the supplier can wipe their hands clean after they deliver and move on to the next customer. We want to negotiate for performance results, so that the suppliers' hard work just begins after they do the delivery.
A True Professional Buyer Negotiates For Results
Some of the things a buyer needs to remember is that purchasing biggest enemy is actually arrogance, thinking that the buyer has to have all the answers. You don’t!
A good leader doesn’t have to have the answers. Good leaders surround themselves with the right people, with smart people, recognizes good ideas and latches it onto them and knows how to make them reality.
You will have to be able to recognize that suppliers understand their industry better than you do and that’s totally okay. That doesn’t mean that you're not a smart individual. It just means actually that you're exceptionally smart because you're recognizing the value that suppliers bring to the table.
Purchasing Biggest Enemy Is Arrogance
In doing so, you need to set an expectation upfront and you have to tell your suppliers,
"Your job is not to deliver product or services. Your job is to ensure we're successful and I am successful."
Purchasing Must Negotiate For Results
Negotiating for Results is Step 2 of the 7 Steps To Win Win Supplier Negotiations. We cover these 7 steps in the free online class webinar "Successful Purchasing Negotiations" presented by Omid Ghamami, who's been nicknamed the "Godfather of Negotiations" from Intel Corp. For a Limited Time This Webinar is Free - Watch It By Registering Here.
All of buyers' activities have to support that. So correspondingly, every RFP you send out should solicit two responses.
First, is to exactly match to the specifications and scope of work (SOW).
Second, is to get suppliers to give an alternate and additional response which is a smarter way to fulfil this demand at a lower Total Cost of Ownership (TCO).
For example here's some questions to ask the supplier: "Can this scope of work be modified? Are there things we should get rid off?"
Every RFP Should Solicit Two Responses:
1 - Match SOW & 2 - Alternate Way To Fulfil At A Lower TCO
It's important to tell suppliers as to 'Why you're doing the purchase?' What's the purpose of it, so that they can help you solve the problems.
There are many examples of where purchasing and procurement asked for the wrong things and the supplier didn’t say anything because the buyer didn't ask. A buyer needs to get into the business of doing that, having suppliers tell us if some of our request are costing a lot of money or if other customers are doing this smarter. Do that and you'll be surprised what you hear from the suppliers, among many other things you might hear:
"When you hired me You asked me to Do X, but all the while You had My Brain For Free, If you Could Have Just Asked?"
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And if you really, really enjoyed it and are truly serious about becoming a Skilled Purchasing Negotiator, you're going to enjoy the 60 minutes free online class that we've created on "Successfully Negotiating with Suppliers". You will also get 3 Bonus Videos That - 1. Will Bust 3 Myths of Negotiations, 2. How To Determine How Much Discount You Should Ask From Suppliers & 3. Why Procurement Has Been Restrained From Negotiating Successfully (and what to do instead) - All these when register for the online class/webinar here.