ADR International trains thousands of buyers and contract managers globally in negotiation skills.
This support is given through instructor led classroom training, online negotiation eLearning modules and team coaching where our procurement experts work together and negotiate alongside the client’s negotiating team.
This experience has provided ADR International with a unique insight into the most common mistakes made when negotiating with suppliers, and the impact of those mistakes on the organization’s financial and operational performance.
- Failed savings opportunities
- Damaged supplier relationships
- Reduced quality from suppliers
- Demotivated suppliers
The top 3 mistakes that drive these sub-optimal results are:
1. Lack of adequate planning to strengthen the BATNA
Most negotiators fail to spend enough time planning. You must create and strengthen the best alternative to negotiated agreement (BATNA) through:
- Aligning negotiation objectives with your organization’s business requirements
- Consulting stakeholders who will be impacted by the negotiation
- Deciding your most desired outcome (MDO) and least acceptable agreement (LAA) (your walk-away point).
- Having a credible back-up if the discussions fail (BATNA).
2. Poor insight into the other negotiating party’s objectives
It is common to spend too much time assessing your own organization’s perspective, and not enough time thinking about the supplier’s point of view:
- How do they position you as a customer or potential customer?
- What are their objectives from this agreement and the wider commercial relationship?
- What are the supplier’s most desired outcome (MDO) and least acceptable agreement (LAA) (their walk-away point)
3. Underestimating the power of concession planning
Concessions are “trade-offs” or bargaining items that can be traded with the other negotiating party. Concessions by both parties allow the negotiation to progress. Planning for concessions is vital to ensure that you secure an agreement closer to your MDO than the supplier’s MDO. Negotiators need to plan their concession strategy so that:
- They have as many potential concessions as possible
- They always obtain a concession from the supplier of equal or greater value in exchange for your concession
- They are able to respond appropriately to the concessions made by the supplier