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Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing by William R. Dorn, Joe Payne

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CHAPTER SIX

Negotiations

HUNDREDS OF BOOKS, websites, training sessions, and seminars are available that go into great detail about negotiation tactics. While you can use those resources to hone your negotiating skills, this chapter reviews the role negotiations play in the strategic sourcing process and provides general guidelines for a negotiation strategy that allows you to get what you want from your suppliers.

Suppliers often maintain a distinct advantage over customers during the negotiation process, especially in the case of indirect spend. The reason is simple—suppliers negotiate over their product or service every single day. Suppliers operate in a single market in which they understand their margins and those of the competition. They meet with customers every day and talk about their products. They have done their homework and the likelihood is that they figured out how much they could make on a particular account the day they were introduced to it. The sourcing team in a company, on the other hand, has to deal with day-to-day operational issues that span multiple project areas. Also, they may be sourcing multiple categories at any given time. Sourcing and negotiations may be part of their jobs, but it is probably not the main focus.

To put this in perspective, while the supplier is 100 percent focused on selling its product, the sourcing team focuses 5 percent of their time (or less) on buying that same product. Or the buyer may dedicate much more time, but only once ...

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