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Successful buyer-supplier relationships: The role of negotiations

Article in Journal of Strategic Contracting and Negotiation · March 2018

DOI: 10.1177/2055563618763037

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Article

Journal of Strategic
Contracting and Negotiation
Successful buyer–supplier 1–16
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of negotiations DOI: 10.1177/2055563618763037

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Helen Rogers
Technische Hochschule Nürnberg, Germany

Ray Fells
University of Western Australia, Australia

Abstract
This article focuses on the negotiation of buyer–supplier relationships and the associated activities
that are required to maintain them. After analysing and distilling contributions from the literature,
we developed a 10-item questionnaire that was subsequently used as a guide for interviewing 36
practitioners in the field. These responses provided new insights into the attitudes and actions that
contribute to relationship management success from a negotiations perspective. This led to the
development of a framework that encapsulates key considerations for negotiation and relationship
management specifically from a procurement process perspective.

Keywords
Negotiation, buyer–supplier relationships, procurement, relationship management

Introduction
In August 2016, Volkswagen, the world’s largest carmaker by sales, announced it would have to halt
production at six of its plants due to an ongoing dispute with two of its component suppliers (Car Trim
and ES Automobilguss). The origins of the dispute can be traced back to June 2016, when VW Pro-
curement Chief Francisco Javier Garcia Sanz wrote to their suppliers, warning the company would be
seeking new ways to cut costs. He justified these measures by asserting that VW faced ‘epochal
change’, driven in part by new technologies and customer requirements. In reality, in the aftermath of
its diesel emissions scandal, VW had no choice but to begin cutting costs to recover from the subsequent
€1.6 billion loss. VW proceeded to cancel a series of deals with its suppliers, including a €500 million
order for special parts from Car Trim. Outraged by the abrupt cancellation, Car Trim retaliated by

Corresponding author:
Helen Rogers, Fakultät Betriebswirtschaft, Technische Hochschule Nürnberg, 90402 Nürnberg, Germany.
Email: helen.rogers@th-nuernberg.de
2 Journal of Strategic Contracting and Negotiation XX(X)

immediately halting all deliveries to VW. The carmaker’s just-in-time approach meant that its pro-
duction lines were quickly affected due to lack of parts. After several weeks of wrangling agreements
were reached, including compensation terms and the drawing up of a series of rules to protect both
sides, should disputes arise again. The exact terms of the agreement were not made public but analysts
estimate the dispute cost VW over €100 million (Handelsblatt, 2016; McGee, 2016; Sloat, 2016). More
importantly, the longer-term relationship between manufacturer and suppliers remained problematic.
Mining forms a major part of the economic activity of Western Australia with, as an example,
around 650 million tonnes of iron ore per year (over one-third of the world’s total) being mined for
mainly Asian markets. The major mining companies each have a thousand or more contracts with
suppliers ranging from earth-moving equipment to catering, to enable them to carry out their mining
operations. Faced with falling world iron ore prices and so needing to cut costs, one of these companies
unilaterally extended the payment terms (from 45 to 90 days) for their suppliers, with immediate effect.
This severely affected the liquidity position of many of the supply companies, making bankruptcy a real
possibility. As a result, a number of suppliers brought pressure to bear on the government – con-
veniently for them there were some international mining events happening around this time – leading to
the public involvement of the Australian Prime Minister. After initially justifying their decisions, the
companies backed down and reverted to their previous arrangements (The Australian, 2016).
These examples demonstrate how, despite the rhetoric about the need for collaborative buyer–
supplier relationships, critical decisions can cut right across those relationships with both short- and
long-term consequences. Buyer–supplier transactions are becoming increasingly driven by techno-
logical processes, but relationships between buyer and supplier are dynamic and are subject to a range
of pressures as the contract is being fulfilled. Once a negotiated contract has been finalised, the rela-
tionship between buyer and supplier is not always as mutual as might have been envisaged at the time
the contract was signed. Pressure on the relationship can be experienced from two sources: first, it can
arise out of non-performance issues relating to the terms and provisions of the contract; and, second, it
can result from decisions taken elsewhere within the organisation that have a ‘knock-on’ effect on
either the operational or financial implementation of the contract. As the two examples above have
shown, the negotiation and maintenance of supply contracts can occur in the context of competitive
pressures on the parties involved. What is particularly interesting to explore further is how the benefits
of cooperation can be maintained over the long term in the context of these competitive pressures.

Exploring the role of negotiation in supplier relationship management

Substantial research has been carried out on supplier relationship management (e.g. Carr and
Pearson, 2002; Chanchai and Young, 2009; Cousins, 2002; Humphreys et al., 2008; Imanipour et al.,
2012; Lamming et al., 2005; Monczka et al., 2008; Qrunfleh and Tarafdar, 2013; Squire et al., 2009).
Dominant themes are cooperation between the partners (some of the key characteristics of which are
shared goals and objectives), open lines of communication, and professional respect and concern for
the other’s profitability (McQuiston, 2001). From a different perspective, Strauss (1978) suggests
that a myriad of negotiations occur throughout any organisation before any decisions are made and
they then continue to occur as those decisions are implemented to achieve the organisation’s goals.
This is certainly true of the supply chain process. Negotiations extend beyond the task of fixing the
contract terms with an acknowledged role in establishing and maintaining buyer–seller relationships
(Cummins, 2015; Handfield et al., 2015, Roxenhall and Ghauri, 2004).
The procurement manager may be the one to sit across the table from the supplier’s sales
representative but many other negotiations will have occurred to reach this point, and many more
Rogers and Fells 3

will occur before the contract is fully completed. Detailed negotiations are required within the
purchasing organisation to establish the contract scope and, almost inevitably, the corresponding
financial parameters. The procurement manager is then tasked with securing the best possible
terms with the suppliers. One route to efficiency in procurement is to reduce uncertainty and
variation of outcomes through use of e-procurement systems (Angeles and Nath, 2007; Puschmann
and Alt, 2005). This ensures there is little or no negotiation and hence reduced variation of pre-
ferred terms. However, if the ‘power play’ between the parties is approximately equal, that is,
neither the buyer nor the supplier is in a dominant market position, negotiations will indeed occur
and if conducted well may yield benefits to both parties (Chang et al., 2013).
Agreements reached in commercial negotiations usually take the form of a detailed document
specifying the rights and obligations of the parties across a range of issues (IACCM, 2014). Even
here, there is a growing recognition that contracts, and the approach of lawyers who draft them,
should be proactive rather than preventative in approach (Barton, 2012). This encourages a relational,
implemental mindset (Ertel and Gordon, 2007; Jorgensen, 2012). This is necessary because once the
contract is finalised, negotiations continue as it is, subsequently, put into effect. These negotiations
are most obvious when difficulties arise but also, more constructively, they can help maintain the
relationship in anticipation of future negotiations taking place. Atkin and Rinehart (2006) found that
negotiators with a cooperative orientation (such as might occur in organisations that emphasise a
partnership approach) are more comfortable with a formalised agreement. This finding is, perhaps,
unexpected, because the expectation might be that parties who are perceived as cooperative towards
each other see less need for documentation, but it is also supported by Roxenhall and Ghauri (2004),
who found from their case analysis that trust and cooperation were engendered through more formal
contracts. Inevitably, however, issues arise during the implementation of a contract and Artz and
Norman’s (2002) survey of purchasing managers points to the importance of developing and
maintaining a constructive relationship to reduce the ongoing costs of managing contract issues.
With these considerations in mind, negotiation can be viewed not as a discrete segment of the
supply chain process but instead as embedded throughout it (see Figure 1). Negotiation starts
within the organisation to determine what is required and who might supply it, continues through
the contract phase in which the extent of actual negotiation can be quite varied and moves on to
negotiations to ensure the proper ongoing implementation of what has been agreed in the contract.
The approach of both researchers and practitioners to negotiation has largely been dominated by
the two strategies described by Walton and McKersie (1965), namely, the competitive, distributive
bargaining strategy and the cooperative, integrative one that lead, respectively, to win-lose and
win-win outcomes. In their analysis of business negotiations, Lax and Sebenius (1986) suggest the
terminology of ‘creating value’ and ‘claiming value’ to reflect the sequence of strategy that is
inherent in most negotiations. Tomlinson and Lewicki (2015) follow a similar approach in
advocating an interest-based approach (Fisher et al., 1991). However, the approach taken in supply
chain negotiations is both strategic, depending upon the nature of the relationship sought (dis-
tributive for an arms-length one and integrative for partnerships) (Zachariassen, 2008), and his-
torical in being strongly influenced by the nature of the parties’ prior interactions (Thomas et al.,
2015). Zachariassen (2008) found that even in partnerships the buyer might continue to use
competitive strategies, whereas Geiger (2017) specifically identified a range of essentially com-
petitive tactics used in business-to-business (B2B) negotiations. Negotiations are rarely wholly
collaborative and an element of competitiveness is integral, even in the cooperative process
(Olekalns et al., 2003; Ott et al., 2016; Putnam, 1990). As an example, in a situation where two
companies had committed to cooperate over sharing resources, the negotiations themselves were
4 Journal of Strategic Contracting and Negotiation XX(X)

Figure 1. The buyer–supplier negotiation process.

still competitive (Fells, 2013). Both Fells et al. (2015) and Ramsay (2004) found an underlying
competitiveness as evidenced in their surveys of business and supply chain negotiations.
The task of finalising and then implementing a supply contract may seem far removed from
management negotiating with the unions in the workplace, but there are important similarities and the
workplace negotiation literature is instructive. The goals of mutual gains bargaining and partnerships
between managements and unions parallel those of approaches to supply chain management that
emphasise the importance of the relationship between the buying and supplying organisations (Bra-
ziotis and Tannock, 2011; Fawcett et al., 2008). Having clear goals, the motivation to cooperate and the
willingness to trust, exchange information and to put in place the surrounding structures that enable
communication to be maintained and issues addressed quickly are all elements of a mutual gains
approach to workplace relations (Kochan and Osterman, 1994; McKersie et al., 2004; Oxenbridge and
Brown, 2004; Walton et al., 1994). Similarly, relationship management with regard to the supply
contract is an important factor in success (Batt and Purchase, 2004; Handfield et al., 2015; McQuiston,
2001). Despite its importance, clarity on what actually happens during business negotiations, espe-
cially those involving B2B transactions, remains scarce (Fells et al., 2015; Geiger, 2017).
This review of the negotiation research gives an indication of the challenges facing any procurement
and/or sales manager seeking to negotiate a buyer–supplier contract in a commercial setting. The
pressure will be on to secure the best deal, but there will also be an expectation that the relationship will
be managed – how can cooperation be developed in this situation? Elements such as trust, information
exchange and the medium of communication all impact not only on the negotiation of the contract itself
but also on negotiations that inevitably arise during the implementation of that contract. If one party
appears not to be fulfilling the terms of the contract, the other may prefer negotiation rather than a
contractual, legal approach to achieve compliance. Perhaps because of an unforeseen change in cir-
cumstances or the advent of a new technology, the purchaser may want to change some of the supply
arrangements and again may prefer a negotiated approach to achieve this. Both parties might envisage a
partnership developing with repeated contracts to their mutual benefit (again, negotiation would appear
to be the process through which this partnership can be built). Despite the importance of negotiation in
the supply chain process, the manner in which these negotiations are undertaken has been less well
researched and is typically described in only general or prescriptive terms (Artz and Norman, 2002;
Atkin and Rinehart, 2006; Fells et al., 2015; Gattiker et al., 2007; Handfield et al., 2015). Here, we seek
to explore how supply chain practitioners manage their negotiations and their supplier relationships.

Research approach
The research approach taken was to carry out an extensive literature review of relevant academic
sources, together with interviews with 36 senior purchasing managers/executives from 8 large multi-
national companies in Europe and the USA with the following criteria: belonging to the high-tech
Rogers and Fells 5

Table 1. Interview questions.

What objectives are you trying to achieve in negotiations?

In negotiating a contract, in how much detail do you try to write down the agreements?
In your experience, what are the success factors for building a successful long-term relationship with strategic
suppliers?
Through what channels and by what media do you conduct your negotiations with strategic suppliers?
How frequently do you communicate with the supplier?
How do you ensure you take an active part in supplier performance improvements? How do you measure
supplier performance?
To what degree do you share sensitive and/or supply chain-related information with the strategic partner?
What specific things have you done to build good relationships with your suppliers?
What events can you think of that make a relationship with your supplier go sour?
When you sense your relationship going sour, what can you do to prevent that?

automotive industry sector; revenue in excess of €1 billion; and over 10,000 employees. An anon-
ymised overview is provided in Appendix 1. Each interview was carried out in a structured way using a
10-item questionnaire (see Table 1) based on the literature, and pre-tested by means of in-depth
interviews with three academics researching in the area of supply chain management Two pilot
interviews were carried out as part of the initial phase to test the interview protocol, and these allowed
for minor refinements to the wording of the questions. For the main study, 36 interviews were
undertaken (Hofstetter, 2013). All participating firms can be broadly categorised as belonging to the
engineering sector, all coming from either the electro-mechanical or automotive sub-sectors.
Respondents were all involved with procurement at a variety of levels and ranged from procurement
managers up to directors and heads of purchasing for their respective organisations. Most respondents
were located in Europe (two-thirds) with the remaining third being located in North America (mainly at
regional offices of European companies). This provided a good insight into opinions from both head
office and subsidiaries. Interviews were carried out by telephone, with the understanding that con-
fidentiality would be observed. This maximised openness and objectivity. The questionnaire was sent in
advance to all respondents, enabling fuller answers to be obtained. As part of the interview preamble, we
asked the respondents to assume that in the procurement situation they described, the appropriate
supplier had already been selected. Hence, the discussion started at the point of the actual supplier
negotiations and ended with long-term relationship management activities. All interviews were con-
ducted within a period of eight weeks. The interviews lasted between 45 to 60 minutes and all 36 were
fully transcribed (in English), with the text being collated into spreadsheets to allow the responses to
each question to be easily compared and contrasted. Analysis was then undertaken through thematic
coding of the responses (based primarily on key words and phrases) to identify common themes.

Analysis: the experience of practitioners

The initial negotiations
The interviews with the 36 senior procurement managers provide rich insights into how they manage
their buyer–supplier relationships and, in particular, into the role of negotiations. As in any other
context, buyer–supplier negotiations occur only because neither party is able to achieve its objectives
without the involvement of the other (Fells, 2016). The ensuing negotiations not only set the terms of
the contract but also establish the context in which the contract will be implemented. With regard to
6 Journal of Strategic Contracting and Negotiation XX(X)

the issues for negotiation, the quality of the purchased product was cited by most respondents (21 out
of 36) as the most important issue for negotiation, although often the quality of the product is
regarded as a ‘given’, implying that quality is not really a discussion item. As one respondent (#33)
stated, ‘quality is not negotiable’. Respondents replied in terms of what one called ‘the magic triangle
of price, quality and delivery’ (#28). However, some recognised that the priority within these three
may vary (#35, #27) and one respondent (#4) was more explicit, ‘it is all about goals – price quality
and delivery are equally important. At least that’s the official party line. But when it comes down to
it, price is number one.’ Respondent #6 added, ‘the management pretends that quality is the main
goal but the emphasis lies on price reductions. So, the hands of procurement are essentially tied.’ This
apparent centrality of price appears to sit uncomfortably with a dominant theme in the negotiation
literature, which is to negotiate over interests, not positions (Fisher et al., 1991; Tomlinson and
Lewicki, 2015); focusing on price is regarded as an unhelpful habit (Sebenius, 2001).
By far the most common form of communication to conduct negotiations was face to face,
with subsequent maintaining of contact by phone and email to negotiate/sort out elements of the
deal. Common responses were that face-to-face communication is the most important type.
E-procurement systems are, however, used but for prospecting (information gathering) and
pre-sorting, ‘In my opinion it is not sensible to use e-procurement solutions to finalise and
close a deal.’ Respondent #23 reported on their more strategic – perhaps better expressed as
‘competitive’ – approach,

our approach is always alternate your approach with a supplier. This year e-auction, face-to-face
meetings for advanced negotiation; next year something else. Don’t do the same thing every year as
the supplier isn’t supposed to be able to adapt to our negotiation tactics.

In summary, we suggest that the role of the procurement manager is a result of rather than part
of the process of establishing the opening position in the ensuing negotiations with a supplier. In
terms of Lax and Sebenius’ (1986) core model of business negotiation, the dominant interaction
seems to be ‘value claiming’ rather than ‘value creating’, which is consistent with competitive
tactics (Geiger, 2017), rather than the more common ‘inventing options for mutual gain’ approach
(Fisher et al., 1991).

Control through the contract as well as in the negotiation

No procurement manager would seek to source a product that did not meet the required technical
specifications, but in a supply chain context ‘quality’ also means maintaining the quality of
implementation for the duration of the contract. For this reason, performance management
becomes a topic for negotiation although, perhaps surprisingly, this issue was seldom raised by the
respondents – one referred to ‘failure rates and liabilities’ (#30) and another to ‘performance
improvement’ (#12), both of which relate to performance management. We will return to this
question of performance management later in the article but, first, some respondents’ comments do
offer insights into how the procurement managers used the contract itself in this regard, suggesting
different approaches with regard to how the buyer–supplier relationship is subsequently handled.
The responses show that the procurement managers seek to draw up detailed contracts and,
further, that a third of the respondents (13 out of 36) referred specifically to the use of standard
contracts in their organisations. The negotiations then involve securing the supplier’s acceptance
of clauses, or minor variations of them, with the real negotiation focusing on the non-standard
items of price, quality and delivery. The clear impression is that the procurement manager is in
Rogers and Fells 7

control of the negotiation process and has control of the outcome, for example, ‘we regulate
everything from price to delivery and quality . . . there is little space for customisation’ (#14) and,

my meeting minutes are occasionally a mile long. It’s important that I can track what has been agreed
upon one year later. We try not to leave the supplier a lot of freedom to ensure we reach our desired
outcome. (#5)

The competitive nature of the interaction is clear, ‘we try to specify the duties of the supplier
very exactly . . . and keep our end of the bargain rather flexible’ (#3).
The use of standardised contracts is an indication of one-sidedness in the negotiation process.
This one-sidedness is also evident in other comments with regard to how the negotiations are
conducted. For example, ‘we maintain the right in every negotiation to write the meeting minutes,
which contain all agreements. The minutes are shared with the supplier (of course), ex-post’ (#30).
Respondent #5 stated: ‘I sometimes give the supplier the freedom to choose on his own where to
reduce the price.’ This is not, then, a negotiation of whether the price should be reduced – that is
taken for granted by the buyer – but rather a case of giving the supplier the choice of how to
accommodate the cut in price. From these comments, we can discern a contract compliance
approach that seems to be at variance with other interview responses (sometimes from the same
respondents) about the need for a cooperative relationship with suppliers.

Trust and long-term relationships

The respondents were asked about three key factors that contribute towards successful long-term
relationships and, of these, trust seems to be central, as would be expected from any review of the
literature on business relationships (Gattiker et al., 2007; Squire et al., 2009). ‘Trust’ is a broad
term with a wide range of expression, but the interview responses together with references from the
literature on trust in negotiation can offer further insights into the meaning of trust in a supply
relationship context. From the responses, we can discern different dimensions of trust. First, trust is
seen as being developed, over time, out of someone’s personal performance: ‘you need to do what
you say you will do’ (#10), and ‘bring words and actions into line’ (#17). Trust is also about a
person’s approach to handling issues, for example, fairness and openness, with fairness regarded
by one respondent (#14) as ‘a primary catalyst’ for trust (although what is ‘fair’ may be viewed
differently by each party). Regular interaction with counterparts provides opportunities for trust to
develop as does ‘being open, with no secrets. Everyone needs to communicate one’s expectations.
[There should be] no untruths towards capabilities or prices. It is also necessary to communicate
where the journey is going, where potentials are’ (#25). Fairness is seen in terms of both parties
getting something out of the relationship, and this leads to mutual commitment. Regarded in this
way, trust is an aspect of personal integrity.
A deeper level of trust comes into play when the parties identify with each other and
understand each other’s needs and aspirations. Lewicki and Weithoff (2000) call this
identification-based trust and several respondents cited actions that could lead to this deeper
level of trust. For example, five respondents (#14, #16, #22, #26, #27) stated that they share
future outlooks with key suppliers, develop research alliances (#28) and assist suppliers to
improve their own processes (#25) where, ‘the success, in the form of savings is split 50:50, so
everybody wins’ (reflecting the notion of fairness again). The use of language may indicate the
nature of the relationship, ‘we are not looking for suppliers, we are looking for partners’ (#15).
8 Journal of Strategic Contracting and Negotiation XX(X)

But there must be substance too, ‘both parties must have an interest in the relationship, otherwise
it is very difficult to grow together and create benefits for both parties’ (#4). Respondent #11
mentioned a situation where both buyer and seller worked jointly to address a technical problem,
‘everyone on the project worked hard and we showed our appreciation. That way we built a good
relationship with the supplier.’ Respondents cited examples of situations in which they would
recommend their supplier to others (#4, #19, #27). Two respondents showed an additional facet
of the relationship – the procurement manager’s role within their own organisation, ‘You also
need the courage to defend the supplier internally, when it wasn’t the supplier’s fault’ (#19), and
‘it is important for the strategic procurement manager to represent the interests of the supplier
against his own organisation. By that, the supplier recognises that I am an honest negotiator, who
is interested in a long-term relationship’ (#30). Actions such as these reflect an expectation that
the relationship will continue beyond the current contract and be backed up by committed
resources; these are tangible expressions of mutual commitment.
Between a personal trustworthiness as the basis of establishing a successful relationship and
the deeper level of identification-based trust lies ‘calculus-based’ trust (Lewicki and Weithoff,
2000), which is more self-interested, that is, a negotiator trusts the other party simply because to
do so should result in a better outcome than not trusting him/her. Viewed in this way, trust is
almost a contractual exchange. Some comments from respondents seemed to reflect this, par-
ticularly in relying on the contract to form the foundation of the relationship, ‘we build com-
mitment through contracts’ (#23), ‘defining the rules of the contract is critical in building trust
and mutual commitment’ (#6) and, similarly, ‘contracts are the backbone of defining the busi-
ness relationship with the supplier. The more detailed the contract, the better the relationship will
be. It mitigates the business risk’ (#4).
In a similar fashion, when asked about what they had done to build good relationships with their
suppliers, four respondents (#8, #14, #19, #36) seemed to take a control-based approach to building
relationships through audits of the supplier’s performance. The need for the supplier to ‘earn’ the
relationship from the purchaser is reflected by respondent #18, ‘a new supplier won’t receive the
pleasure of a very close cooperation in the first year’. We note that this control approach is
consistent with, and perhaps a result of the competitive approach to the initial negotiations that was
identified in the previous section.
These responses contrast with others where a longer-term relational perspective emerged
reflective of identification-based trust (Lewicki and Weithoff, 2000) and of an implemental
mindset (Ertel and Gordon, 2007). The interview material did not give any indication as to whether
this relational perspective was the consequence of an explicit proactive approach in the contract
itself (DiMatteo et al., 2012) or of bilateral governance (Dauer, 2012), but appears to be more
alliance-based. Five respondents reported that their organisation engaged strategically with the
supplier through formal presentation of future plans, etc. Critical to any relationship is the
information that is exchanged between the parties. Over a third of respondents (14 cases) stated
they would share their strategic plans with their clients, although often on a selective basis, that is,
only to core suppliers (in 4 cases). Twenty respondents stated they would provide forecasts on
volume requirements (although this may be regarded as self-interested disclosure) and 12
respondents would go further and share company sales/inventory data. But, at the same time, the
respondents who share information often do so with limitations, for example, only where there is a
non-disclosure agreement (in 6 cases). Caution with regard to sharing information is reflected in
responses such as, ‘we stay vague’ (#1) and ‘we are very careful with information, I try to
determine what information the supplier needs to work properly and make informed decisions. But
Rogers and Fells 9

not more than is necessary’ (#5). Comments such as these seem to indicate that procurement
managers cannot shake off an underlying competitive perspective with regard to their buyer–
supplier relationships.

A relationship through managing performance

Clearly, an important aspect of the buyer–supplier relationship is the supplier’s performance in
terms of their contractual obligations. Most respondents carried out supplier evaluations on a
periodic basis and these were data driven, typically through KPIs with regard to price, cost, quality,
logistics, etc. (cited by 24 out of 36 respondents). A typical description of the approach taken is,
‘we evaluate the performance of at least 80% of our suppliers. With cross-functional teams, we
evaluate the performance of the supplier along the dimensions of quality, cost, technology and
delivery’ (#16). Some go further (#22),

two years ago, we launched a supplier collaboration tool to assess and evaluate suppliers . . . The
suppliers receive feedback on their performance. We have a toolbox to improve the supplier perfor-
mance. This contains value stream mapping, whereby we go to the supplier with our process expert
team and implement process improvements.

A more collaborative relationship might suggest each party helping the other beyond the strict
performance of the contract, ‘we host workshops to see what we can do to improve the supplier’s
process’ (#11) and, ‘if the supplier doesn’t reach a certain performance, there is the possibility of
launching programmes for improvement. This may involve regular improvement audits at the
supplier’s site. We also have tools for supplier development’ (#13).
The approach taken by some respondent organisations seems more ‘problem-driven’ than
proactive, reflected in comments such as (#3),

we do not actively seek to improve the supplier. Only if there are problems with the quality, do we try to
actively improve things. Generally, we do not have the experts on the suppliers’ products at our
disposal. The supplier usually knows their business better.

and, ‘we don’t do training with our suppliers but when a problem appears, we get in contact and
determine causes, initiate improvements and then we audit again’ (#9). Others are even more
passive, ‘our company currently, does not take further actions to improve the most important
suppliers. Our suppliers make improvement efforts on their own and merely tell us the good news’
(#1) and, ‘in our contracts we specify that our suppliers have the responsibility to conduct con-
tinuous improvement measures. After certain periods of time, we expect them to present improve-
ments to us’ (#12).

When relationships turn sour

Finally, as some of the above comments imply, not all contracts are negotiated smoothly and the
relationship between buyer and supplier can be adversely affected. Respondents cited a number of
reasons why the relationship can turn sour. These include: contract problems (e.g. poor delivery,
quality and late payment) (17 responses); changes to contracts, such as price rises or an increase in
volume (10 responses); and ‘unfair’ contracts (i.e. one side exploiting the other) (9 responses). A
similar number of respondents mention interpersonal issues or questions of ethical behaviour as
10 Journal of Strategic Contracting and Negotiation XX(X)

other causes of difficulty. Implicit in many of the responses is the presumption that it is the other
party who has caused the relationship to go sour. Only one respondent had a contrasting view, ‘if
mistakes have been made, apologise sincerely’ (#19).
With regard to how best to handle difficulties in the relationship, unsurprisingly, many
respondents’ comments involved face-to-face communication and giving feedback, as well as
referring to the importance of personal relationships (although three respondents also recognised
that it can be the personal relationship that is the problem). Six respondents mention involving
higher management, although one expressed the view that ‘most problems are located in higher
hierarchy levels’ (#18). A different approach to addressing a problem might include ‘hint at no
more business’ (#2) or more bluntly, ‘or simply switch suppliers’ (#33).
In considering the interviewees’ comments on this issue there is a sense that the respondents are
commenting on circumstances where the relationship has already gone sour, rather than while it is
going sour. This may reflect their organisational position and role, removed from the day-to-day
implementation of the contract. This apparent reactivity highlights the need for organisations to
pay attention to the role of line managers and the part they can play in maintaining constructive
relationships at the ‘sharp end’ of the contract, that is, its implementation.

Reflection
Our analysis of the respondents’ comments offers many insights into the practices of procurement
managers as they seek to effectively manage relationships with their suppliers. In contrast to much
of the literature that advocates cooperation, an underlying competitive imperative is evident
throughout the interviewees’ comments. However, these comments also reveal some clear prac-
tices that might be built on and then suggested as contributing factors in building and maintaining
successful buyer–supplier relationships. We categorise these under three headings: enablers,
practicalities, and relationship repair. These are shown in a revised model of the buyer–supplier
negotiation process (see Figure 2).
We suggest that open and, importantly, two-way communication is crucial. The buyer is usually
(but not always) in control of the process. However, buyers should earn the cooperation (rather
than mere compliance) of their suppliers through their approach to communication and the
exchange of information. Trust is equally important, but it is easily presumed. Trust should be
based on a person’s integrity and, more broadly, the reputation of the organisation should not be
undermined by unilateral changes to the contract, no matter how severe the commercial impera-
tives may seem. In developing a relationship, the trust between buyer and supplier in the first
instance will be mainly self-interested and calculative, but for even this basic level of trust to
develop there must be certainty. Beyond this, the relationship manager should be looking for
broader relationship opportunities. Circumstances may mean that, in fact, there isn’t any scope for
further mutual gain, but an open mindset will be alert to any opportunities that might arise during
the life of the contract and, additionally, convey cooperation to the supplier. On the other hand,
some factors that might inhibit the development of a successful relationship can also be suggested.
Inhibitors would include: having a one-sided, competitive approach to the contract negotiations,
having a rigid contract compliance mentality; and, third, allowing intra-organisational pressures of
competitiveness to cloud a person’s judgement.
In terms of practicalities, notwithstanding the extensive use of electronic communication,
nothing beats face-to-face communication. Similarly, if a more successful relationship is sought,
then investments must be made, particularly through sharing information that will enable the
Rogers and Fells 11

Figure 2. Revised model of the buyer–supplier negotiation process.

parties to understand each other more fully and so make decisions that look to the mutual growth of
the relationship rather than just deal self-interestedly with the immediate problem. This may well
include investing time and energy on behalf of the supplier (and for the buyer too). Any com-
mercial relationship will almost inevitably have its difficulties. It follows that to remain successful,
the parties should take a genuine problem-solving approach to any issues that arise, an approach
that should start at the point of implementation of the contract, not just once the issue has reached
the attention of the procurement manager.
Drawing on the insights gained from this research, some key elements in negotiating buyer–
supplier relationships are suggested, separated into enablers, practicalities and relationship repair
(see Table 2), amplifying the model presented in Figure 2.

Implications and conclusions

Notwithstanding the use made of bidding systems, such as the tender process and e-auctions, the
data presented by practitioners’ negotiations shows that trust, shared objectives and long-term
personal relationships continue to be central success factors in buyer–supplier relationships. These
elements reflect the importance of taking a negotiation perspective when considering all aspects of
the supply chain process.
One feature of the practitioners’ responses was the underlying competitive context within which
they operate, typified in the comment of one practitioner, ‘it is all about price’. A second recurring
theme is what might be termed a contract perspective, where the focus is on compliance with the
contract terms. These two factors do not sit easily with exhortations to maintain collaborative and
cooperative relationships with suppliers, but they are the reality of most procurement and contract
managers. The framework presented in Figure 2, supported by the experience of practitioners,
identifies the elements of a negotiation approach to the challenging task of maintaining open and
constructive relationships with suppliers.
The three elements of the framework take our understanding of negotiation beyond the typical
win-lose or win-win characterisation and show that relationships are not built by broad statements
of intent but through constant managing of the interactions between the parties with an emphasis
on personal conduct. This enables the parties to address hard issues constructively. Cooperation
means more than keeping the peace through making a concession.
Similarly, the framework/negotiation perspective pragmatically provides a solution when dif-
ficulties arise. An over-confident approach that assumes cooperation will prevail ignores the tough
12 Journal of Strategic Contracting and Negotiation XX(X)

Table 2. Key elements in negotiating buyer–supplier relationships.

Enablers

 open – and two-way – communication and information exchange;

 trust based on personal integrity;
 organisational trust shown in the clarity and stability of the contract;
 all resulting in trust that, in the first instance, is calculus-based;
 actively looking beyond contract compliance to broader relationship opportunities.
Practicalities
 actively seeking face-to-face contact with the supplier – opportunistic rather than only in response to
problems having arisen;
 an increasing exchange of commercial and strategic information beyond the requirements of the
contract;
 personal integrity (and that of the organisation) is maintained;
 trust builds into a clear identification and understanding of each other’s interests and aspirations;
 objective performance management, representing the supplier when necessary;
 investment beyond words into mutual activities.
Relationship repair
 recognising the important role of line management in building proactive relationships;
 a rapid, objective, face-to-face response when adverse situations arise;
 encouraging a mutual problem-solving approach to addressing difficulties.

realities that often face one or both parties in a buyer–supplier relationship. Recognising what
might cause difficulties is a critical aspect of negotiating cooperatively.
The focus in this article has been on the management of the buyer–supplier relationship, but it is
important to note that the relationship enablers – communication, trust, etc. – are equally signif-
icant in the earlier contract negotiation stage, doubly so if the person negotiating the contract is
later going to be the person ensuring its implementation. A limitation of the research lies in the fact
that the respondents were primarily procurement managers, meaning that the supplier perspective
was not fully addressed. This is something for future research.
Further analysis of the present data set of interview responses will allow the opportunity to
examine more closely whether the negotiation interactions reflect a cooperative or competitive
orientation of the stakeholders. Given the emphasis on cooperative relations between buyer and
supplier, the tension between the resolution of specific, perhaps pressing and costly issues, and the
need to maintain a collaborative relationship will be explored. A further avenue of research would
be to examine the content of communication (including negotiation) and whether there is any
distinction in the mode of communication (face-to-face as opposed to email) with respect to
contract negotiations and contract maintenance. The role of trust with regard to behaviour and
outcomes in a relationship management context is an underlying issue that needs to be studied
more closely. Further research could also examine whether face-to-face and email communications
are used for different purposes, for example, is email actually used mainly to confirm, clarify and
follow up on face-to-face discussions? Or, is it the case that issues and contracts are now negotiated
and resolved entirely through email? And, if so, what impact does this have on the content of the
contracts, and on the subsequent buyer–seller relationship?
These and other issues could be developed into a testable model of the relationship between
buyers and suppliers, negotiation stages and relationship success. Further research into supply
chain management though a negotiation lens would involve extending the research into other
Rogers and Fells 13

aspects of the supply chain. In particular, an important aspect to explore, perhaps through case
studies, would be the negotiations that occur within an organisation to define what it wants from
a new supply contract. Many of these aspects, such as the technical requirements, might well be
non-negotiable. There might be organisation-wide requirements with regard to financial or
insurance provisions that can’t be varied from contract to contract. Factors such as these may all
shape the buyer’s proposal into a ‘take it or leave it’ offer, in which case, what sort of ‘coop-
erative’ relationship is being offered? Similarly, exploration of the views of suppliers as to the
extent to which buyers are prepared to actually negotiate over key terms, and the suppliers’
perception of whether buyers are, in practice, relationship- or contract-oriented would be another
important avenue for research.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship and/or publication of this
article.

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Author biographies
Helen Rogers is a Professor of International Business at the Technische Hochschule Nürnberg,
Germany. Her research interests include negotiating procurement contracts and the cultural chal-
lenges of global product development and sourcing. She has published in international journals on
business negotiation and global supply chain-related topics.
16 Journal of Strategic Contracting and Negotiation XX(X)

Ray Fells is a Professor at the University of Western Australia. His industrial relations background
led to his research interests in negotiation and mediation, particularly in the workplace, but also in
the broader business context. In addition to a wide range of publications he is the author of
Effective Negotiation: From Research to Results (Cambridge University Press).

Appendix 1 Respondent profiles.

Revenue in Number of
Company sector US$ (billions) employees Function of interviewee

Energy management 20–30 150,000–200,000 Project Manager

Energy management 20–30 150,000–200,000 Strategic Purchaser Europe
Energy management 20–30 150,000–200,000 Strategic Purchaser Europe
Energy management 20–30 150,000–200,000 Strategic Purchaser Europe
Automotive manufacturing 30–40 150,000–200,000 Strategic Purchaser Europe
Electronics and machinery 70–80 400,000–450,000 Commodity Manager Head Canada
Electronics and machinery 70–80 400,000–450,000 Commodity Manager Regional Head
Electronics and machinery 70–80 400,000–450,000 Commodity Manager USA
Electronics and machinery 70–80 400,000–450,000 Warehouse Services Europe
Electronics and machinery 70–80 400,000–450,000 Procurement Manager USA
Electronics and machinery 70–80 400,000–450,000 Commodity Manager Director GER
Electronics and machinery 70–80 400,000–450,000 Head SCM Canada
Electronics and machinery 70–80 400,000–450,000 Procurement Manager USA
Electronics and machinery 70–80 400,000–450,000 Procurement Manager USA
Electronics and machinery 70–80 400,000–450,000 Director SCM CA
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and machinery 70–80 400,000–450,000 Procurement Director
Electronics and engineering 50–60 300,000–350,000 Procurement Manager USA
Electronics and engineering 50–60 300,000–350,000 Procurement Manager USA
Electronics and engineering 50–60 300,000–350,000 Director Procurement USA
Electronics manufacturing 1–5 10,000–20,000 Director Procurement Automotive
Electronics manufacturing 1–5 10,000–20,000 Director Procurement Electrics
Electronics manufacturing 1–5 10,000–20,000 Director Procurement Mechanics
Lighting manufacturing 5–10 25,000–50,000 Director Procurement GER
Lighting manufacturing 5–10 25,000–50,000 Director Procurement North America
Lighting manufacturing 5–10 25,000–50,000 Procurement Regional Manager
Lighting manufacturing 5–10 25,000–50,000 Procurement Regional Manager
Lighting manufacturing 5–10 25,000–50,000 Procurement Regional Manager
Lighting manufacturing 5–10 25,000–50,000 Procurement Regional Manager
Automotive manufacturing 10–20 75,000–100,000 Project Procurement Manager
Automotive manufacturing 10–20 10,000–20,000 Strategic Purchaser Europe

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