Whether you are negotiating on the sell-side with your best accounts or negotiating with key and strategic suppliers, the leadership team needs to be clear on how suppliers can create value that flows through to your best accounts.
I participated in a negotiation exercise at Harvard with a head of procurement from a global brand with a turnover of more than US$60 billion. Prior to the exercise it was clear that her company did everything with their key suppliers that Harvard said was globally best-practice.
The exercise started and the atmosphere was charged with tension. Suddenly facial expressions and body language changed from 'let's work on a better outcome' to 'you are just a supplier and I want the best deal'. It was a brutal negotiation and no agreement was reached.
During the debrief, the change of behaviour was discussed and the remarks were not surprising. Although the leadership team talked about negotiating differently with key and strategic suppliers, wanting value and innovation, they measured their employees on how much money they saved this year.
While companies have this outlook, value will always be lost. However, people and companies are changing and for the better. Companies like P&G, 3M Cisco and Westpac to name a few are rethinking their business model with key suppliers.
The International Association of Outsourcing Professionals (IAOP) released their list of 'Top Outsourcing Trends'. One trend was a growing procurement (or buy-side) interest in building truly strategic relationships with a small number of appropriately chosen outsourcing suppliers. Models where customers and service providers work collaboratively to develop a performance-based partnership, will be increasingly used. Customers will move outsourcing out of the back-office and into more customer-facing processes and strategic opportunities.
The potential benefits of a collaborative outsourcing arrangement are attractive to any industry or vertical to produce better results. Creating the right environment to foster such a relationship, and having the right operational or governance model to maintain it, is a leadership issue and not an operational issue.
What is the leadership model of your company?
Leadership and negotiating better results with strategic and key suppliers requires a new business model and approach. Ask yourself: When was the last time a key supplier came to you with an innovative idea that you could use with your customers?