Advantages of Negotiation in Procurement:

With the news trumpeting daily stories about global supply chain issues, the complexity and importance of procurement in today’s economy has never been clearer. Likewise, the advantages of negotiation in procurement have never been higher.

While suppliers are often well-trained in sales and negotiation principles and techniques, negotiation training is equally important for procurement professionals. In addition to the strategic and technical skills needed to identify, source and buy goods and services, procurement professionals must know how to build and manage long-term relationships and maximize value for their organization through effective negotiation.

TableForce has years of experience negotiating high stakes purchases and offers extensive procurement negotiation training. Let our team of experts share with your team the importance–and advantages–of negotiation in procurement.

Procurement Negotiation Training

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Top 10 Advantages of Negotiation in Procurement

Procurement positions can be a difficult balancing act. You have the dual responsibility of ensuring your organization spends its money wisely while building and maintaining productive, long-term relationships with both external and internal stakeholders. The importance of negotiation in procurement in helping achieve these goals cannot be overstated.

Below are the top ten advantages of negotiation in procurement deals:

When it comes to negotiation skills in business and in life, communication is key. Open, direct, two-way communication means listening to and understanding the needs of the other party, as well as being able to clearly and concisely articulate your own position. This helps establish understanding, trust and respect.

Establishing understanding, trust and respect in buyer-supplier relationships is the foundation for achieving your goals. It means being honest and no-nonsense in your own dealings, as well as evaluating, identifying and engaging with the right vendors–those who understand your needs and are willing to act as your partner.

A big part of why we negotiate in the first place is because there is no easy solution for both parties. This means that it is natural for disagreements to arise. Negotiation skills allow you to spot negotiation tactics–something a person says, does, or threatens to do that is insincere and designed to solicit an adverse reaction–and counter them calmly and effectively.

Frank and open discussion is the quickest way to identify and address problems. This is particularly important in cases where your organization has complex needs or an existing supplier is not meeting expectations in terms of performance or quality. Negotiation skills help you deal with problems collaboratively and reach a common understanding.

The “zone of possible agreement” (ZOPA) is the range in which an agreement is satisfactory to both parties. Finding this common ground involves effectively trading concessions. Good negotiation planning allows you to identify what you can and cannot concede in order to reach the ZOPA while protecting and growing value for your organization.

Traditionally, lowered costs have served as the holy grail for procurement professionals, and they remain an important goal today. Negotiation skills can help identify cost overruns and achieve overall price reductions.

There is a difference between cost and value. We refer to this as knowing the cost of the drill and bits versus the value of the holes. Negotiation may not always result in lowered costs, but it can result in higher value to your organization through concessions such as reduced cycle times

Negotiation allows both parties to agree upon expected performance level through clear, well-laid-out service level agreements (SLAs) and key performance indicators (KPIs). Negotiating terms and conditions in this manner helps mitigate future issues with project scope, timing, delivery and payment.

Negotiation allows you to set and monitor expectations for quality standards, including the reduction of defects and maintenance and warranty agreements. Like negotiating to improve performance, establishing these terms and conditions upfront helps avoid problems down the road.

It is vital to remember that negotiation is not a zero-sum game. Truly successful negotiation is when all parties feel they have achieved a “win-win” outcome. The most successful negotiators look to create value–positive items that benefit the other party–and claim value–items of benefit to them. This approach means that all parties feel they have achieved a fair and equitable deal and provides a firm foundation for long-lasting, productive relationships between buyers and their suppliers.

Choose TableForce to Learn About the Advantages of Negotiations in Procurement

From building relationships to understanding negotiating power to planning and tactics, your team can immediately and effectively apply our negotiation framework to all their professional interactions. The result is courageous and confident negotiators who produce win-win outcomes for your organization.