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Negotiation in procurement guide

Master your negotiation by understanding the stages and why it’s so important

What is negotiation in procurement?

Negotiation is important within our profession. It's the communication between two or more parties with the aim of reaching a mutual agreement.

There are several reasons for negotiations:

  • Costs: To reduce the cost of acquisition by achieving a lower price
  • Value: To achieve added value such as reduced lead or cycle times
  • Performance: To improve performance through KPIs' and SLA's
  • Conflict: To resolve conflict through reaching understanding
  • Problem: To solve a problem by having an open discussion
  • Quality: To achieve optimum quality through reducing defects
  • Agreement: To reach a mutual agreement in a collaborative style where all parties are satisfied.
 

Top negotiation tips for success

Being able to negotiate successfully isn't easy and being able to do it comes with practice. Take a look at some of our top tips to help you navigate your way through negotiation.

  • Be prepared
  • Be confident
  • Listen and observe
  • Influence and persuade
  • Have something to offer
 

What are the 7 stages of negotiation?

The negotiation process can be broken down into seven main stages.

 

What is supplier negotiation?

Supplier negotiation is the process of negotiation favourable terms are part of a new contract. You can negotiate different terms with existing suppliers or discuss terms with a brand new supplier. Negotiation is a key activity for procurement and supply professionals, and you should prepare a strategy for any negotiations.

 

How to negotiate with powerful suppliers

It’s important to spend time building your supplier relationships and finding mutual interests, especially if they are powerful suppliers. Find new ways to bring value to your supplier, this could be by being the gateway to new markets or finding innovative ways to reduce the supplier’s risks. Think about purchasing bundles, volumes and consolidate purchase orders, these all will help your negotiation position. Importantly, define what makes you successful and use it to your advantage.

 

Setting objectives with suppliers

Setting objectives with your suppliers will contribute to the success of your working relationship. Establishing smart goals keeps everyone focused, aligns efforts and drives continuous improvements, as well as setting clear expectations.

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

7 rules of negotiation

For organisations to grow, negotiation skills need to be possessed by management and key employees. Take a look at our seven rules of negotiation. Explore the Seven Rules of Negotiation.

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