The Five Rules of Negotiating

1. Always ask - you never know what you might get.

2. Know what you want - it is difficult to have a successful negotiation if you don't know what you

want. It's also important to know what is totally unacceptable, and would be a deal breaker.

Sometimes it's better to go with the status quo, rather than to accept a lesser deal.

3. Prepare for the kind of negotiating you will be engaged in. There are five types of negotiations:

impromptu, informal, formal, one-of-a-kind and ongoing relationship.  It's this last kind that

requires the most preparation and care. These are the negotiations that take place with your

spouse or your manager, and they deal not only with tactical issues, but also longer term

strategic ones. This kind of negotiation is more cooperative, and has a greater atmosphere of

trust and concern for the ongoing relationship as well as possible solutions.

4. Understand cultural differences. In may places outside the United States, the marked price is

not the one that people expect to pay. There is an expectation that there will be haggling. And it

turns out that these days, you can go to a store like Home Depot in the United States and ask

for a lower price. 

5. Practice, practice, practice. This means ask for things everywhere in your life. If the person

you're asking can't give you what you want, find out who can. As kids, we learned to ask Mom

or Dad for what we wanted until they gave in. Don't accept the first "no", and remain committed

to win-win.  Look for ways to reach a mutual agreement on solving a common problem.

The Top Ten Procurement Changes in the Last Decade

10. ERPs Proliferated. Today, eProcurement and eSourcing are two of the most useful tools in

purchasing. Ten years ago, these terms were unknown.

9. "Procurement" replaced "Purchasing". Ten years ago, even top purchasing departments

processed purchase orders. Today, procurement departments centralize the supplier selection process,

not the transactions, which are delegated to end users or outsourced.

8. Procurement Controls More Spend. When procurement deliver results, management seeks more

spend that they can positively impact. Once sourced by other departments, categories like fleet

management, benefits, and travel services are now sourced by procurement.

7. Social Responsibility Became A Top Priority. Whether for philanthropy or to avoid media

scandals, management counts on procurement more than ever to buy from diverse suppliers, make

environmentally-conscious decisions, and do business ethically.

6. Measurement Was Mandated. With the potential of smart purchasing widely known, senior

management more strictly holds their procurement professionals accountable for results. The use of

procurement KPIs and dashboards is now the norm.

5. Strategic Sourcing became an Internal Process. In the past, strategic sourcing was done mostly

by consulting firms hired to help companies reduce spend. Today, many companies have their own

refined and documented in-house strategic sourcing processes.

4. Vendor Roles Expanded. In 1998, there was talk about "partnering" with vendors. Today, there's

action. Top procurement departments actively develop their vendors and look to their supply base for

ideas, performance, and innovation.

3. Global Sourcing Went Mainstream. Ten years ago, only the progressive companies were searching

abroad for suppliers. Now, in some countries, it is difficult to find products manufactured domestically.

2. The CPO Position Was Adopted. There is a growing number of professionals with the title "Chief

Procurement Officer."
1. The Supply Chain Was Recognized. In the last decade, companies more closely analyzed the way

material flows into, through, and out of the organization. This "supply chain" focus has those who once

just placed orders now responsible for inventory, warehousing, outbound logistics, and distribution.

he Six Laws of Persuasion

Persuasion is the ability to influence people's thoughts and actions through the use of specific strategies.

Getting what you want in life will require negotiation with a variety of people and the use of

communication skills such as active listening and attention to non-verbal cues. Mastering the persuasion

process will enable you to create the attitude change necessary for persuading others to agree with your

line of thinking. You must be able to sell your ideas, and in a win-win situation, provide the other side

with a fair deal.

To become skilled at persuasion, you need to know more; you must understand the the Laws of

Persuasion. Psychologist Robert Cialdini described the six laws of persuasion in his book, Influence:The

Psychology of Persuasion. He discusses the prevalent methods of marketing, and how by understanding

persuasion laws, you can control how much marketers unduly influence you, as well as how to use these

laws to your benefit during negotiations.

Cialdini’s Six Laws of Persuasion:

1. Law of Reciprocity  People try to repay what others provide them. Small favors bring on a

sense of obligation. People feel compelled to “return the favor.” If someone gives you something

you want, then you will wish to reciprocate because you now feel obligated. In negotiation,

limited disclosure of the real reason for a stance, such as "this is all the money we have" can

induce a concession from the other party.

2. Law of Commitment and Consistency. People like to seem consistent in their thoughts,

feelings, and actions. Once they have made a stand, they tend to stick to it and behave in ways

that justify their earlier decisions, even if they are erroneous. An example of how to use this

tactic would be to use a series of questions to conduct a step-by-step close. Get the other

person saying "yes"right in the beginning. You can get this to happen by asking the other side

to make a number of small decisions that lead to only one obvious conclusion: to accept what

you are saying and say "yes". You could use this strategy by asking a potential client if she
 values quality in your product or service. Of course the only answer would be “yes.” Then you

could follow by saying “We’d love to provide you with this product/service, but if we don’t get

the resources we need from you (i. e. sufficient money) and quality suffers as a result, would

you still want it?” How can the prospect say “yes” to poor quality? This tactic makes it easier for

you to ask for additional funds.

3. Law of Liking. When people like someone, or believe that they are “just like them,” they are

more inclined to want to please them and, therefore, purchase whatever they are selling. This is

how successful salespeople operate; they establish rapport by demonstrating how similar they

are to their potential buyers. The "good cop, bad cop" strategy also takes advantage of this law,

because it causes you to develop a rapport with the good cop, and you are more inclined to

agree with him.

4. Law of Scarcity. When people are not sure they want to buy something, the minute it becomes

“the last one available” they often have second thoughts. After all, this must indicate that others

are purchasing it, and they might not be able to get another one quickly, or at all, if they decide

you want it later.  The more time you spend with a salesperson, the more commitment he or

she has to make the deal. If you are under no time pressure and the other side is, you have the

upper hand.

5. Law of Authority. Celebrity endorsements or “expert” testimonials lend an air of desirability or

quality to products. Vendors often quote vague authorities to sell their wares, “Experts say our

product is the best.“ But who are these experts? What are their qualifications to make these

claims? Do they have a vested interest in selling the company’s products or services? you

should use this law to establish your own credentials/credibility early in the negotiation.

6. Law of Social Proof. This law works best when you draw on testimonials from satisfied

customers to encourage new prospects to buy your products.

Being skilled at persuasion is the key to success.  If you give people what they want via the Six Laws of

Persuasion, they may well return the favor. And when you are aware that you are being manipulated,

you can call the other side on those and counter with a more appropriate strategy.

KPIs for Responsible Sourcing

Responsible sourcing has reached a crossroad as companies have evolved from an approach based on

employee compliance to one that goes beyond this to drive continuous improvement through strong

supplier management and partnerships. Companies seek to demonstrate the value of responsible

sourcing, but the lack of common standards for evaluating these successes threatens to undermine

further development and wider adoption of these responsible sourcing practices.

There are a number of metrics currently in existence that impact the process of goal setting and

evaluation:

 Goal setting and the key performance indicators for supply chain sustainability remains a work

in progress. Most focus on qualitative program descriptions and challenges, rather than

focussing on outcomes or value. A better approach would be to focus on continuous

improvement.

 Public reporting is still focussed on negatives such as lack of supplier compliance, while measure

so of positive values are underdeveloped. A more sophisticated approach would be to measure

both supplier capacity as well as performance. Suppliers need to be able to understand the

value created by their meeting responsible sourcing requirements, as this will provide them with

the best motivation to comply.

 Supplier scorecards do not capture the data needed to allow internal audiences to make

informed sourcing decisions. It's important to build ownership for metrics so that responsibility

for implementation can be assigned throughout the company and accountability is clear. Micro-

level targets can be established, and rolled up to provide a picture of overall performance,

 IT infrastructure remains a critical barrier to program measurement. Difficulty in accessing

information has limited the ability to manipulate and analyze data. Fixing these problems will be

expensive.

 Supply chain processes are not sufficiently transparent so that it can be determined that

companies are managing their supply chain responsibility at an acceptable level. Companies

need to demonstrate that they are meeting these commitments to their investors and other

stakeholders, and they need to demonstrate how the value derived from these efforts on social

and environmental issues.

Methods for evaluating the success and impact of supply chain sustainability programs must continue to

be developed. Deficiencies in creating internal alignment must be addressed, and IT systems must be

upgraded and improved. Communication between companies and investors must be developed with

greater clarity around responsible sourcing practices and how they impact social and environmental

outcomes. Communication and collaboration among stakeholders as well as transparency in the

collection and analysis of metrics and indicators needs to be developed.

Purchasing Ethics: 7 Sensitive Situations

The procurement group can sometimes find itself in the uncomfortable situation of having recommended

a supplier that has left internal customers unhappy. Even when cross-functional teams are sued to

ensure buy-in to decisions, the end result can sometimes be a questioning of the ethics of the

procurement group.

There are a few areas where procurement professionals can unintentionally add to this negative

perception.

1. A procurement team member has accepted a gift from the winning supplier.  It could be

something as small as a pen.

2. A procurement team member mixes business and pleasure with a supplier, such as discussing

business over lunch.

3. A procurement tram member has a personal or financial relationship with a supplier or an

employee of the supplier.

4. A procurement team member owns a supplier's stock.

5. A procurement team member provided certain information to one supplier that was not provided

to other suppliers in a competitive bidding environment.

6. The procurement team did not provide transparency for a supplier selection, including failing to

internally share selection criteria, proposal details, and the rationale for the decision.

7. The supplier selection criteria used was different than the criteria noted in the Request for

Proposals.

Regardless of how low in value, procurement professionals should not accept gifts of any kind from

suppliers. This is not because it automatically indicates impropriety, but because of how such an action

might be construed. This includes free pens and lunches.

Personal or financial entanglements with suppliers do potentially pose an ethical dilemma. If the

connection is substantial enough, the procurement team member may need to recuse him or herself

from the decision. Care should be taken to ensure that there is no appearance of impropriety.

Lack of transparency to all suppliers in a competitive bidding environment is highly unethical, and great

pains should be taken to avoid doing this,  even unintentionally. Meticulous records of all

communications made with suppliers in a bidding precess must be kept.  Clarification made to one

supplier in response to a query must be provided to all suppliers.

Lack of transparency to internal customers of the supplier selection process is a poor but all too common

practice. It shows disrespect to the organization's employees, and it builds ill-will. The importance of

effective horizontal communication cannot be over-emphasized.

Look out for the existence of any of circumstances in your organization and either eliminate them, make

it clear that these practices are not violating ethical standards.

Five Steps to Successful Vendor Selection

The vendor selection process can be daunting, especially if the goods or services are unfamiliar or

technical.  Following these steps will help to ensure a successful outcome.

1. Analyze the organization's business requirements:

 Assemble an evaluation team including end users

 Define the product, material or service

 Define and prioritize the technical and business requirements

 Define the vendor requirements

 Publish a requirements document for approval

2. Perform a vendor search:

 Compile a list of possible vendors

 Select vendors from which to request information

 Write a Request for Information (RFI)

 Evaluate responses and create a "short list" of vendors

3. Prepare Requests for Proposals and Requests for Quotations:

Submission Details:

 Introduction and executive summary

 Business overview

 Background

 Detailed cpecifications

 Assumptions and constraints

 Terms and conditions

 Selection criteria

4. Evaluate the proposals and select a vendor:

 Perform a preliminary review of all vendor proposals

 Record business requirements and vendor requirements

 Assign  an importance value for each requirement

 Calculate a total performance score

 Select the winning vendor

5. Negotiate a contract:

 List rank your priorities along with alternatives

 Know the difference between needs versus wants

 Know your BATNA (best alternative to a negotiated agreement)

 Define any time constraints and benchmarks

 Assess potential liabilities and risks

 Define confidentiality and/or non-compete requirements

 Plan for any future dispute resolution

 Assess all of these from the perspective of the v