Negotiation gurus abound. The one concept they agree on is that the best prepared negotiator will be the most successful one. The well prepared negotiator spends 80% of her time on foundation research ranging from understanding the balance of supply and demand for the material, to the suppliers financial performance, to the underlying raw material, labor and overhead costs to produce the item.

A written strategy for each negotiation is also prepared. The strategy articulates what must be accomplished in the negotiation, the rationale for why the supplier should agree to the deal and what our alternatives are if the negotiation is unsuccessful.

Conduct the negotiation face to face whenever possible. Sales people have a hard time literally walking away from a deal. Also, you can ask the simple yet powerful question: What else can we do to lower total costs. You will be surprised at how creative your suppliers can be in responding to this question.

Finally, tap all the total cost levers. Unit price is just the beginning. There is also value in payment terms, inventory holdings, freight terms, lead times, access to new technology, etc.

Best Practice | Case Study | Commentary

April 5, 2000
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