Way to often procurement organizations don’t even have a procurement strategy let alone a supportive negotiation strategy!
What is your procurement organizations overall procurement strategy? All to often, when this author asks this question, the response I get is that deer in the headlights look that says to me there either is not one in place or the person I’m asking the question of has know idea how to answer the question. If there is no procurement strategy, there certainly is no supportive negotiation strategy because how companies negotiate should support their overall procurement strategy or at least it should.
The cause for the above is quite often that there is no formal procurement organization in place to begin with or the function is lost within a supply chain organization, logistics organization or finance organization. And sometimes it is located in operations and spread all over the place.
It’s a good bet that if there is no well defined organizational procurement structure within a company that there are multiple maverick negotiation strategies going on and that many of the associates conducting these negotiations are not skilled at doing so and don’t have any advanced tools other than spreadsheets, email and telephony to conduct the negotiations with.
The result of the above is a lack of collaboration and well thought out aggregation, maverick buying, expired and or ever greened contracts and much higher than needed cost structures.
So before you can negotiate effectively you will have to go back to the drawing board and develop a procurement strategy. Once that’s in place negotiation best practices can follow.
Check back tomorrow for part II where I’ll offer some suggestions on negotiation strategy. If you’d like to learn more before then, please contact a customer services representative at SafeSourcing.
We look forward to and appreciate your comments.