The scope of this white paper is supplier relationship management.

The aim of the white paper is to explore the negotiated collaborative supplier relationship. This description is suited to a subset of strategic suppliers where the relationship has been jointly created in an intentional, behaviours – driven manner.

Each organization may have its own terminology, but the relationship features are common.

The first element of the negotiated collaborative relationship is the “negotiated” part. The relationship has been designed by the relationship contributors in a formal, considered way. The contractual, performance, and behavioural parameters are aligned, agreed and documented.

Secondly, the negotiated collaborative relationship is characterized by its collaborative nature. Multi-functional team work, transparency of information and problem-solving activities are the norm between the buy-side and sell-side.

The white paper will explore the reasons why such a relationship may be considered, what is required to resource these relationships and what benefits they can offer the buying and supplying organizations.

1: Why choose a negotiated collaborative relationship?

A negotiated collaborative relationship is a model where buy-side and sell-side representatives agree to a team-working style. It is a resource intensive but high-reward approach that is only possible with a small number of relationships. Collaborative suppliers are typically formed with strategic vendors where:

• The supply market has little or no credible alternatives, and / or:
• Quality failure relating to purchase presents a significant risk to safety, security or reputation and the likelihood of detecting an incident before it occurs is low, and / or:
• There is greater benefit to both parties through a collaborative relationship compared to one that is characterised by leverage-type behaviours (a tactical relationship).

The relationship is chosen because it is evident to both supply side and buy-side parties that there is significantly more value available from this type of relationship than a traditional buyer-supplier relationship and it is therefore worth the additional effort.

Figure 1: How buy and sell-side expectations differ for supplier relationship types

Collaborative supplier relationships are typically borne out of commercial necessity rather than sentiment. They are not a soft option and will seldom present an easier management task than tactical suppliers.

2. How is the Negotiation Collaborative Relationship formed?

The relationship may be established at any time throughout the life of the total relationship. It could be at contracting stage for a new supplier, or mid contract for an established one. For incumbent suppliers, it is likely that a new commercial framework will need to be set up that reflects the new dynamics in terms of performance management, compensation and commercial outcomes.

Expert supplier managers never allow supplier relationships to elide from tactical to collaborative. It is always intentional and negotiated in the same way that a commercial agreement is discussed.  Such discussions look at three aspects of the relationship, all of which have commercial implications – thinking, practices and behaviors.

Thinking: the relationship strategy – why do both parties want this, what do they hope to achieve from it? Incremental financial reward, reputation, risk management, business development sustainability and quality improvement are all potential aspirations. This requires documenting and revisiting just as much as the legal agreement.

Practices: the relationship tasks – how will the outcomes be achieved and when? The tasks, responsibilities and approach should form the basis of regular discussions and meetings, rather than routine performance management.

Behaviors – this is both the style and the associated behaviors to be adopted. They will be applied consistently during contract management, performance challenges, solving problems and addressing reward and sanction.

Internal stakeholders must be part of agreeing these elements with the supplier because they will often be the main party who is implementing them on a day to day basis.

3: Brainstorming in strategic supplier relationships

Brainstorming ideas for improvement should be an expected, routine part of the negotiated collaborative relationship activities. This could occur during regular online meetings or face to face reviews.

The usual brainstorming rules apply – all suggestions are positive, worthy of compliment based on the effort made to devise them, and worth discussing. The more ideas, the better. Most importantly, the supplier should feel that the more input they have to the idea’s generation, evaluation and execution, the greater the chance of success. It is the buyer’s job to make that statement the truth by appropriately resourcing the selected ideas through senior sponsorship, motivation and appropriate commercial response, if appropriate.

Investment should:

• Be shared (or not) between the buy and sell side in whatever split matches the relationship goals
• Be proportionate to the return
• Allow enough emotional distance that if it fails, it does not damage the relationship or belief in the concept of continuous improvement.

If either party does not appear to be engaging with the problem-solving approach to the previously agreed extent, the reasons should be discussed. It may be an institutional issue (e.g. my boss won’t sanction this) or it could reflect an unwillingness to make personal change by the account manager (it inconveniences me). It is the buyer’s job to enable problem solving and tackle these challenges with the cross-organization team.

Whose job is it to generate ideas for improvement? Both parties, of course. But if the expectation is for the supplier to propose more ideas, then it is only fair that buyer should contribute a higher level of enthusiasm and personal commitment for attainment of the goals. As long as everyone on the team is inputting something – expertise, resource, insight, or excitement. It all has value for relationship quality.

4: Managing power imbalance

Many strategic relationships take a vested relationship model, where negotiation is left behind as “old-style” thinking. However, the main difference in a negotiated collaborative relationship is that that it doesn’t matter if there is relationship imbalance between the parties.

Negotiated collaborative relationship are not equal relationships.

Problem solving and creative thinking are required by all parties, but not necessarily in the same proportions.

In fact, it is may be a healthy thing to acknowledge it and to build a relationship that uses that imbalance as a source of strength. It is not so much a “partnership” as a “dynamic”.

Many elements could contribute to a sense of imbalance. It can be a cause of frustration in strategic relationships that our partners are not “treating us well”. This can be driven by many issues, for example:

• Capacity or capability gaps
• Fit of relationship to business goals
• Friction between personalities
• Company culture or application of leverage behaviours

The negotiated relationship occurs when the parties agree that it will help the relationship and its outcomes better if one of them is the “driving” party and the other is the “supportive” party. This power dynamic might be temporary, or it could mark the entire character of the partnership.

This does not reflect a sense of precedence, superiority or intellectual dominance. It is just an acknowledgement of what will be effective for everyone. Once it is negotiated, a framework of practices and behaviors can be established that match the agreed style.

This example shows how a negotiated collaborative relationship might operate with an imbalanced approach:

When the team is balanced in terms of complementary skills, motivations and commitment, the source of these elements is irrelevant. The teamwork model of supplier relationships means that both parties accept that a negotiated relationship is appropriate. They then establish a suitable relationship style that helps to maintain the momentum towards the agreed relationship goals. That style needs considerable exploration to set up, experiment with and freeze.

5: Setting up a performance management framework

Negotiated collaborative relationships typically represent high risk, high spend suppliers. It makes sense that they would have a robust performance framework so that supplier managers can target and track outcomes. Yet performance frameworks are often not collaborative, by virtue of being:

• Based on buy-side business needs, not things that are important to the supplier’s business.
• Imposed, with first sight being at the competitive bidding, negotiation or contracting stages.
• Associated with sanctions (at the extreme, termination for breach of contract)

This is not in keeping with the interest-based negotiation that should accompany the launch of a strategic relationship. Realistically, negotiating the performance framework together with suppliers can sometimes drive the sort of defensive, cautious behaviours that are not collaborative at all.

Not having a performance framework is hardly an option: the business (and sometimes regulators) expect that relationships that could involve catastrophic consequences to safety or security must be monitored carefully. This often drives the use of performance motivators such as financial sanctions, growth limitations or some form of relegation in the buyer’s organization. Minor infractions that do not cause jeopardy may incur smaller negative consequences.

The thing is, suppliers have a choice about performance: either commit fully to excellence or decide whether the punishment for non-performance is worth it.

And it might be worth accepting the buyer’s sanction if

• A more valued customer needs the resource that is required to address the performance issue
• A new prospect or sale is diverting the supplier.
• The supplier deems the account not worthy of the investment, or nearing its end of life

Buyers get quite insulted by these sorts of excuses, but instead of foot-stamping, the buyer can remind the supplier that letting the team down damages the agreed relationship infrastructure. Buyers must also take responsibility for performance management and its associated behaviours. “Managing the KPIs” is not enough. Suppliers need

• Personal attention to issues that concern them such as payment
• An open channel to share feedback
• Reward for behaving within the agreed relationship style

Regular meetings, checking in to see how the agreement and the people are and deciding how to celebrate successes are all team activities that support relationship-building.

Performance frameworks usually involve punishment. Punishment of any kind can encourage “hiding the truth” in an effort to avoid the consequences. This secrecy does not suit collaborative relationships, and it can be a bold choice to avoid rigid performance measurement with strategic suppliers. If suppliers demonstrate that they need sanction (due to repeated breach of performance conditions), the relationship should be demoted in style back to the tactical model (e.g. you are not mature enough to work in the teamwork way, so we’ll have to build back up to it through practice).

6. Managing suppliers using behaviour modification

Most buyer are familiar with the concept of conditioning. It is about the use of messages and behaviour to create a desired perception in a current or prospective supplier.

It Is applied frequently during competitive bidding to enhance the motivation of suppliers to win or keep business and magnify their concerns about losing out on opportunities. This is a tactical use of conditioning because it is short-term in its focus and it is best suited to suppliers in competitive markets.

Conditioning is a form of behaviour modification that is just as important – maybe even more so – for strategic suppliers.

Behaviour modification of suppliers through buyer-driven initiative suits negotiated collaborative relationships, where a team work model supports strategic supplier partnerships.

For example, maintaining an upbeat, energetic tone underpins joint problem solving and continuous improvement. It demonstrates optimism that the team will find solutions together and overcome obstacles. It is the buyer’s job to drive this positive tone and monitor if it is being effective in contributing to the mutually agreed outcomes.

Where the supplier does not appear to be as proactive as the buyer would expect of a partner, the buyer will also use behaviour modification techniques, perhaps ignoring supplier behaviour that is unwelcome (where it is not damaging to do so) and praising any contribution made.

Just as the buyer needs to examine what motivates the supplier, the smart supplier will do the same of the buyer. Suppliers will consider whether behaviour modification would benefit the relationship and in what ways suppliers should seek direction from the buyer about how to challenge and change this.

For example, the supplier could be encouraged to ask the question “how does that meet the milestone set?” if the buyer reverts to a price-focused discussion during a review meeting. The total cost implication could be relevant, but price-talk tends to be tactical in its intent. Nagging to remind us of how we agreed to behave is 2-way.

7. How to set up the negotiated collaborative relationship

If you have decided that a teamwork model is correct, it is useful to start the meetings with a session dedicated to documenting the reasons for that assessment. Brainstorm why you feel this relationship is superior to alternatives or the other party offers more value than their peers. These are your relationship strengths, and they are what you can come back to in difficult times. They are also the foundations of your first initiatives. If you feel that the team has great cost analysis skills to customer service focus, use these themes as the basis of your first projects. This is also a good way of practising the skill of “letting someone else drive the bus” because you may need to hand over the wheel temporarily while the person who is most suited to take the lead at that time takes over. Resources are complementary in a team. Stick to your knitting.

Blame is not useful in buyer / supplier discussions. It is better to be effective than “correct”.

When a supplier is immature (but you have no choice but to use them), it is not useful to point out their deficiencies repeatedly. Instead, remind the supplier that they must prepare for the events where their gaps are likely to cause performance problems and get on top of that through regular self-assessment of capability and performance output. It gives the supplier time to review, risk-assess and respond.

Conclusion

The negotiated collaborative relationship is visible in many modern Procurement teams, often with other titles. When it is working well, it is a showcase relationship that demonstrates the value of team working. Power imbalances are not a cause of concern. It is the contribution of many different personalities and capabilities that is the source of strength, if they are utilized in a coordinated way in the relationship.

The style is a potential template for a greater number of suppliers, where the return on investment if evident for all parties.

What do the best Supplier Managers get right?

A 2019 supplier management benchmarking study conducted by ADR International investigated how best practice organizations achieved higher value from vendor relationships.

We found that while most Procurement and Supply teams work hard to manage performance, best practice exemplars of supplier management focus on the conditions that allow their suppliers to excel. These four principles were demonstrated by world class practitioners of supplier management.

Principle 1: Sequence Category Management before Supplier Management

Before we start to tier / segment / classify suppliers, we must have a category strategy. The category strategy is a long-term vision of how interventions in groups of spend will support the triple bottom line of people, profit and planet. A category view assesses cost, market conditions and customer needs before deciding on the optimal sourcing, contracting and relationship strategies.

Principle 2: Make listening to suppliers – individually and collectively – a good habit

Listening with intent is a good habit for any business professional. Fostering this among Supplier Managers, Stakeholders and Procurement demonstrates to suppliers that we care about helping them meet their business goals.

Best in class supplier managers create opportunities to listen. Regular calls, dedicated time to brainstorm improvement, collecting feedback, discussing trends and surveying the supply base. Listening…

• Is courteous, encourages contribution and problem solving
• Ensures that the buy-side team adopts a common style towards a supplier
• Helps us navigate the market to our advantage through supplier insight

Principle 3: Use the customer’s needs as the basis for behaviour and reward for suppliers

Organizations that start strategy planning with the end customer’s needs focus on what is important. We demonstrate to the supplier what really matters through performance measures. If we have the mechanisms, we can reinforce this through our approach to reward and compensation.

Reward must match the behavioural style chosen for the relationship. Best practice supplier managers choose a relationship style (often in collaboration with suppliers) that matches their relationship objectives in terms of cost, quality, sustainability and customer value.

Principle 4: Guarantee success – because everyone likes to win

You know the difficulty with putting Procurement people and Sales people in the same room? They both like to win. This can also be a benefit, when it is a cross-company team. Allow, enable and encourage teams to win through small or major project initiatives. Those organizations that recognize that people like being on the winning team are the best at finding joint wins.

Conclusion

To drive value from supplier management, best practice organizations apply these principles daily. They succeed most when suppliers and stakeholders tell their peers the great outcomes they have experienced. Supplier management is best driven by great role modelling and positive behaviours rather than a systems-imposed solution.

What do modern procurement professionals want from training?

Procurement professionals want to learn and to develop themselves. It is something they look for when searching for new roles. It is also critical for attracting people into the function and keeping them there.

Organizations must offer growth opportunities for Procurement people that appeal to their interests as well as meeting organizational requirements.

At ADR, we work with organizations to design blended learning programs that address a range of needs. Many use competency assessments to determine the key skills gaps. However, some still say that the learning has not met their needs fully.

Competency assessment is best used as part of a wider review of needs, using this stepped approach:

1. Understand Business Needs that define your function’s goals

Business Needs will come from various sources

• Organizational strategy and vision
• Stakeholder and supplier feedback
• Organizational culture and team working
• Procurement department current and future strategy and targets
• Succession plans and future organizational structure
• Shareholder expectations

These needs help to define the priorities of the team and this needs to translate into daily practices and behaviors through good training.

2. Set Learning Objectives

Ultimately, Procurement will need to have a clear understanding of how they bring value to the organization and how its people underpin that. This will then drive the learning objectives. Like all good key performance indicators, they should be a few SMART metrics that are critical to success. It does not matter if they are not finance-related. Many Procurement teams define their impact in other ways like customer satisfaction, or circular economy metrics. The objectives should do the following:

• Link to organizational goals
• Clarify department target and individual contribution
• Have resources and pathways available so everyone knows how they are going to be able to contribute

3. Identify Skills Gaps

Self-assessment accompanied by line-manager discussion is a valuable method to understand the gap from the current state to the desired state. It is much more helpful to perform skills assessment against the future organizational model than against current role descriptions. An aspirational target sets the right tone – future state, not current state.

4. Create Learning Interventions

Learning interventions are training activities. The 70:20:10 learning model shows that 70% of learning should be on the job, 20% through informal learning and 10% through formal learning. Formal learning includes video, podcast, classroom, webinar and eLearning courses and discussions.

Procurement people often tell us that they feel their L&D offering is not suited to their needs – that training is “one size fits all”. At ADR, we find that the most common requests from procurement professionals are:

• They want to find out how future trends and technologies are going to help them.
• They want access to modern tools and resources, and support to become expert in them.
• They want choice about when, how and what to learn. This means a blended program of instructor-led classroom, webinar courses plus self-directed eLearning and micro learning on a range of topics, frequently updated.
• They want on the job and social learning efforts like peer learning, mentoring and experience sharing (the 20%) to be facilitated, recognised and rewarded in the same way as their formal training (the 10%).

5. Measure Learning effectiveness

L&D efforts must be measured against the stated learning objectives rather than a generic goal such as “save more money”. If incremental cost improvement from application of new techniques is expected, then the individual must be responsible for tracking and demonstrating the technique and its direct impact.

This requires a tool that records outputs AND outcomes not just inputs. This can be a challenge of the traditional learning management system.

When approached with a 70:20:10 mindset, procurement learning and development is not an “edge of desk” activity, it is the day job. It represents a cultural belief that doing things in the same way will not get better results. Continuous learning application is the most reliable route to improvement.

It is increasingly common for organizations to separate Sourcing from Supplier Management tasks, if not the entire function – it is clear why.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

Buying organizations that are highly vulnerable to issues such as reputational damage, business continuity failure and security breaches often have dedicated Supplier Management functions.

Supplier Management encompasses a wide range of risk management, performance improvement and contract ownership activity. Most businesses find it is normal now to have fewer vendor relationships that house massive cost and risk.

Meanwhile, the Sourcing team has a huge responsibility to continually observe the supply market and look for emerging sources of capability and advantage. They run large, complex competitive bids, manage challenging contractual negotiations and enhance value through methods such as cost improvement and improving sustainability in their supply chains.

The advantages

Dedicated supplier performance managers, able to judiciously apply incentive programs. •Full time resource focused on supplier capability development, cost improvement and innovation.

Separation of roles protects the partnership from the relationship battering that competitive bidding can involve.

The disadvantages

Supplier Managers are sometimes inadequately involved in the process of business needs analysis and contracting, which hampers performance management later on.

Future visioning of the supply base can be a low priority when operational imperatives are the focus.

The needs of Supplier Management can overshadow commercial wisdom. Risk management, new product development or new projects mean that the Supplier Managers are not always monitoring whether the current relationship style suits the competitive landscape of the supply market.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

One of the best things about being part of a small, global business is the frequent opportunity to learn how Procurement is evolving in other countries and cultures.

Here are some insights I gathered when speaking to my colleague Abed Sinan from ADR’s Middle East business. The team’s client base is typically in the Gulf Cooperation Council (GCC),a political and economic alliance of six Middle Eastern countries (Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, and Oman). The GCC has a population of around 45 million and GDP in excess of 1.4 Trillion USD.

A profile of procurement skills in the Middle East

Current state:

• Many procurement decisions are still largely stakeholder-led and procurement people are often perceived as an “after-the-fact” team to implement the plan.
• Many individuals have skills strengths in specific sourcing and supplier management activities, but often need training in the full category and supplier management process to make connections between the competencies and to leverage their combined knowledge. As Abed commented, “there is no one-stop shop buyer”.
• Procurement competence development is a low priority for too many organizations.

Opportunities:

• There is a high appetite for learning, and procurement competence is increasing rapidly in all GCC states.
• ADR coaches consistently report a “have a go” attitude from learners. They want to try all new tools and techniques.
• Procurement professionals in the GCC feel strongly that their learning activity should have an immediate impact on their sourcing activities. Our ADR tutors note that the “return on training” is very high when training is followed with category coaching. There is a strong will to demonstrate benefit through concentrated use of sourcing and supplier management techniques.

The key themes of Generation Z according to a McKinsey&Company article include:

• Fewer confrontations and more dialogue
• Inclusivity and multiple definitions of self
• Realistic and pragmatic perspective

The highly open and ethical mindset is conducive to effective collaborative negotiations.

These are typically difficult negotiation behaviours to master, with many Generation X and Y procurement negotiators falling back to competitive behaviour when pressured for savings or speed.

Most importantly, collaborative negotiations are increasingly the norm. Many procurement professionals are working on categories that involve strategic relationships with suppliers. This may be because the market is non-competitive, dependency or because there is a clear benefit from close long-term working.

It is often the case that strategic relationships are given to the more experienced or long-serving staff members. However, the portfolio matrix reminds us that resource allocation should be based on behavioural fit. Given this profile, Strategic categories fit Generation Z procurement professionals well.

Critical category: ideal buyer personalities

• Tenacious
• Problem-solving
• Dynamic

Strategic category: ideal buyer personalities:

• Creative
• Inclusive
• Discussion-leading

Acquisition category: ideal buyer personalities

• Organised
• Meticulous
• Data-driven decision-makers

Leverage category: ideal buyer personalities:

• Driven
• Motivated and motivators
• High expectation of self and others

At ADR International, we teach negotiation skills to Procurement professionals worldwide, both classroom and online. With a larger proportion of Generation Z buyers in our classes, the shift towards digital learning is apparent. In addition to providing more online learning, what should Procurement Leaders do to ensure their Generation Z procurement staff are developed to excel in collaborative negotiation?

• Generation Zers need to experiment and explore. Allocate them to strategic category teams to contribute.
• Empower Generation Zers. They will generate ideas and should be accountable for delivering them.
• Encourage them in supplier management and supplier meetings. Being attuned to the importance of mutual gains will add authenticity to their discussions.

Source: McKinsey&Company. “True Gen: Generation Z and its implications for companies”. Tracy Francis and Fernanda Hoefel

There is a lot of advice about how to plan and execute supplier negotiations, but the key to success is understanding the objectives and tactics of the supplier.

Counter-tactics can improve negotiating outcomes for procurement professionals. For example:

Know where the supplier is in their sales cycle.

The supplier may be at the stage of prospecting, identifying needs or proposing a solution directly to budget holders or functional managers. The procurement person will be using different conditioning and influencing methods at each stage.

Remember, the supplier will sell first and negotiate second.

Avoiding negotiation is a smart way of deal-making for suppliers. Procurement can counter this by starting the negotiation process first, and early.

Recognise the supplier closing tactics.

There are many ways a supplier will try and close discussion and make agreement. The procurement professional needs to be in control of this. Taking charge of the progress of discussion blocks the suppliers attempts to close too soon.

There are 3 ways you can learn more about supplier negotiation tactics and how to tackle them:

• ADR’s Online Procurement Academy for Negotiation: eLearning for people who negotiate with suppliers
• ADR’s Online Supplier Influence Course: An instructor-led webinar for in-house teams
• ADR’s Negotiation Tactics Training : A role-play based classroom course for procurement people

Sustainable procurement looks at how sourcing and supplier management activity supports sustainable development, where economic and social growth is encouraged in ways that does not negatively impact life. Environmental, social, economic and health topics all fall under this banner.

ISO 20040, the quality standard for Sustainable Procurement was introduced in 2017. This gave organizations a framework for understanding and monitoring the impact of their procurement activities on individuals, communities and the environment.

Some organizations focus on the Dow sustainability indexes, which provides a global measurement of corporate sustainability performance across multiple sectors.

Many organizations seek the coveted Industry Leaders title. These organizations are the top performing companies in each of the 60 industries represented in RobecoSAM’s Corporate Sustainability Assessment (CSA) and the Dow Jones Sustainability Indices.

However, many Procurement teams are not embedding sustainable procurement practices in their daily work. These three areas should be a key focus for sustainable procurement activity:

1. Strategy development

Category and sourcing strategies should identify the specific sustainable procurement issues that are most relevant to the category being purchased, and actively demonstrate that research and creative thinking is being used to improve the sustainability impact of the acquisition.
For example, a life cycle sustainability assessment would include the identification of solutions that minimize energy usage, extend pro-social procurement and enhance life opportunities in the communities where  the organization buys from.

2. Supplier selection

Supplier selection and evaluation criteria should highlight that  prospective suppliers who can evidence proactive development in economic, environmental and social issues (both in their own organization and in their supply chain) will be recognised as part of the competitive bidding process.
For example, there may be a high emphasis and weighting of services suppliers that can demonstrate that their recruitment policies are supporting local workers, creating apprenticeships or enabling SMEs to become a greater proportion of their supply base.

3. Contract management

The ongoing review of supplier operational and business performance should include sustainability improvement as a key element of  continuous improvement activity.
For example, a supplier of goods, equipment or materials may work in collaboration with the buying organization to reduce waste in the production, storage and distribution of the items.

By working together with stakeholders, procurement professionals can extend sustainable practises into many elements of the sourcing process and contribute to the organization’s sustainable credentials in its overall supply chain management.

Find out more about how you can improve your sustainable procurement practices in ADR’s Ethics and Sustainability Course, available as an Instructor-Led Classroom or Virtual Classroom Event.

Negotiating with suppliers requires a blend of behavioural and analytical skills. Without thorough analysis, no mystical influencing techniques will help to secure agreement in a challenging discussion. A review of the buyers’ and sellers’ markets alongside an assessment of the position of the respective parties is essential.

Supplier economic analysis uses supplier financial statements to provide a view of the supplier’s financial performance and associated negotiation stance. The buyer can choose to take a quick view of the supplier’s position and how this may impact relative power. Or, the buyer can choose to take a more in-depth study of the supplier. This will depend on the level of risk involved in the purchase and the amount of time available to invest for what level of return.

A quick overview will tell the buyer some information that is useful prior to negotiation:

• What gross and net profit does the supplier make as a business?

This may be compared to the industry benchmark, to the historical trend and to the account cost model that the buyer has obtained from the supplier for the purposes of should or could cost analysis.

• How is the supplier organization structured?

Ownership is an important element of how the supplier makes decisions. If they are shareholder owned, they may have different priorities and perspectives to a private or family owned organization.  The organization will impact when the supplier’s financial year runs and when their accounts are published in what form. It is useful to be aware of financial quarters of the supplier when they may feel pressured to make a significant sale.

The form of the accounts may be an extensive annual report or a summary that meets government requirements, depending on the organization type. This may impact the type and quantity of information available to the buyer.

• What level of financial risk does the supplier represent?

A brief calculation of the size of the buyer as an account relative to the supplier’s overall income gives a good indication of how the buyer sits compared to the suppliers’ other customers.

This also helps the buyer to determine if the level of planned spend with the supplier is appropriate, particularly given the overall mix of products and services that the supplier is selling.

The size, profitability and attractiveness of the sale are relevant to the supplier’s potential motivation to sell to and service the buyer’s account.

An analysis of supplier solvency and liquidity provides a snapshot of the supplier’s ability to meet both immediate and longer-term liabilities in the form of salaries, purchases and debts. This analysis can be supported by a credit report and should be viewed in the context of the overall business plans of the supplier and the market conditions.

Deeper analysis

Where there is a greater need to assess supplier financial performance to understand their business efficiency and effectiveness, ratio analysis is useful to support a deeper economic study. This will give indicators of performance through return on capital employed, speed of collection of income from customers and inventory turnover. Comparison of these elements with similar organizations and industry benchmarks will provide the buyer vital clues that indicate where there are areas of opportunity.

This opportunity could be immediate cost reduction or longer-term continuous improvement ideas. In either case, supplier economic analysis is a good starting point for a challenging or collaborative discussion with a supplier.

Yes, you can learn negotiation techniques online. It is not an “inferior” approach to instructor-led classroom role-play-based teaching. E-learning is simply a different learning mode that fits with the way the modern professional wants to learn.

1. It’s global: E-learning breaks physical barrier limitations. With internet access negotiators from any part of the world can access content 24/7/365 on desktop, laptop or tablet.

2. Learn at your own pace: With internet access learning is provided on demand. Got a negotiation coming up and need to prepare and plan? Need to decide on the negotiation strategy? E-learning is there to help just when you need it.

3. It’s interactive: The best way to “sense-check” your negotiation strategy or determine if “I have been doing it the right way all these years?” is to self-evaluate using e-learning’s scenarios, checkpoints and quizzes based on real-life scenarios.

4. Use and learn at the same time: Negotiation e-learning is packed with templates that can be used to model the learner’s own negotiation strategy. By completing the templates the learning and negotiation execution happen at the same time.

5. It’s inclusive: Negotiation e-learning focuses not only on the buyer’s role and negotiation tactics but on those of stakeholders and suppliers too. E-learning takes into account all parties’ perspectives and counter-tactics.

6. Leaves no stone unturned: Negotiation e-learning reminds us that no single tactic or personal negotiating style makes for an effective negotiation. Each negotiation must be tailored and adapted to secure an effective agreement.

7. It’s flexible: Negotiation e-learning can be used standalone or blended with other learning modes such as pre and post online negotiation skills assessment, instructor-led negotiation simulation and online coaching.