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We overcomplicate the procurement negotiation and supplier management process




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We overcomplicate the procurement negotiation and supplier management process. Over the last 17 years, a few fundamentals have been the "constants" that continue to shape my negotiations!



Nothing beats the negotiation preparation exercise. You may think an RFP (months long) or an RFQ (weeks long) will allow you to prepare gradually, or you can play it by ear, but your anchor or response to the supplier's first offer will always determine the success of the negotiation. 




Dont jump to price immediately when you enter the negotiation room. Conclude your problematic items (or most-demanded items) first, except the price, before you bring the price into the picture. I always prepare my Absolute must-wins along with trade-offs before I walk into any negotiation.



Especially during RFPs, the team (or a person) designing the scope of work is usually the most powerful factor in shaping the outcome. Build the scope of work using the incumbent solution specification? The chances of the incumbent winning the award increase significantly. Add a feature that only the incumbent (or a specific vendor can provide, and you have just locked in the outcome. While you can run the sourcing process, it will just play out according to the technical superiority embedded in the scope of work document!



Information is everything in negotiation! Demand information, new market or geography, product substitutions, committed volumes, vendor lock-in scenario, internal appetite to change the vendor - all these are extremely tactical inputs that you must collect beforehand as part of your preparation.


Also, choosing what to share and when is key.


Overshare everything at the start of negotiation - You lose the leverage during the first round of negotiation itself! On the other side, hiding the demand information, you lose economies of scale. 



Hence, dispense the information wisely and in a timely manner!



Supplier management is not about transactional elements. It is about managing suppliers' P&L in your category, and it should form part of your negotiation. (Not as a post-award activity)




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