E-Procurement and Supply Chain Management: Negotiating 101

Within the realm of business negotiations there are two forms of negotiations you can make, depending on time and circumstance. Especially when it comes to procurement and supply chain management. Using e-procurement might be able to mitigate the need for the negotiation process, but knowing how to negotiate is still a good skill to have. Furthermore some researchers actually believe that when e-procurement is properly integrated with a firm’s supply chain strategy, it can increase cooperation, trust, and the chance for win-win negotiations.

When it comes to bargaining and negotiations, you can either be integrative or distributive. Integrative negotiation occurs when both parties are trying to reach a win-win solution. The alternative would be distributive negotiation, when you’re trying to gain as much of the metaphorical pie as you can. Below are a few tips for negotiating depending on whether you want to maintain a distributive or integrative stance:

4 Tips for Effective Distributive Negotiations

1. Never back down

You’re in it to get as much as you possibly can within the negotiations. In this scenario your BATNA (Best Alternative to a Negotiated Agreement) is quite large and your acceptable bargaining zone is small. You’d rather break off negotiations than continue outside your resistance zone.

2. Be respectfully assertive

Not only are you not backing down, you’re playing aggressive. Constantly push for your own agreements, don’t be afraid to be aggressive.

3. Negotiating isn’t about morals

You’re not interested in being morally right regarding negotiations. You have a goal and that’s all that matters. It’s Machiavellian, but if you want to win in distributive bargaining you can’t get into principles.

4. Never discuss bottom line

Don’t let them know what you need to meet in your minimum possible scenario. That’s an edge you don’t want the other parties to have. But you want to learn what their bottom line is and pursue that.

A common feature of distributive negotiations is that there is only one winner. As a result distributive bargaining always results in a win-lose scenario, but can lead to quite high pay-offs. However if the other party refuses to participate on your grounds, this can easily lead to a lose-lose situation.

An example of a situation when distributive negotiating might be a good fit involves the buyer and seller relationship in a supply chain. When demand is low, and when there are large numbers of suppliers, the buyer will wield more power. Whereas when demand for a particular item is high and there are only a few suppliers, the supplier will wield more power. Within either of these procurement scenarios, distributive negotiations might be a good supply chain management strategy.

4 Tips for Effective Integrative Negotiations

1. Friends, not enemies

Highly important to integrative bargaining is a need to build positive relationships. You want to encourage trust and cooperation, rather than develop opposite stances.

2. You know what you want, but you also know what they want

You play fair and you’re willing to make concessions and collaborate. As a result it’s imperative to be objective and consider the situation from a bird’s eye view position.

3. Principles are important

Principles create an environment of trust. Discuss moral issues and principles with your negotiation partner to further develop a positive relationship.

4. Don’t keep secrets

Remain confident in discussing your issues and what you’re looking for. This can encourage the other party to do the same, allowing both to reach a mutually beneficial agreement.

Important to integrative bargaining is a need to trust each other. It can be difficult when approaching negotiations and deals for the first time. However if trust can be created, than the result would be win-win scenarios.

Consider the buyer and seller relationship again. When both buyers and sellers have had a history of working well together, practicing effective e-procurement strategies that build trust, and have a commitment to certain principles such as green supply chain management; the chances of integrative negotiations increase as being a good fit. This could lead to an improved value chain, resulting in increased profits.