The Procurement and Supply Manager's Desk Reference, + Website, 2nd Edition

CHAPTER 9

Negotiation

Your organization naturally seeks to obtain the maximum value for its investment in goods and services. Not surprisingly, so does your supplier; both organizations seek to gain the highest possible benefit from all of their business transactions. So when there is much value at stake, both parties generally come together to reconcile their differing positions. This process is referred to as negotiations.

As you have learned in previous chapters, any business transaction involving commercial buying and selling requires both a valid offer and acceptance. Between these two elements, however, there typically lies a gap of expectations and requirements: Your budget, for example, allows a certain amount of spending for a particular purchase, but the supplier's offer contains a significantly higher amount. Obviously, this creates a gap. How do you reconcile these two seemingly oppositional positions so that each organization can achieve its respective goals? In these circumstances it is critical to engage the supplier in some form of negotiations.

A major portion of the buyer's time will be spent conducting negotiations with suppliers to obtain more favorable terms for their organization. That is not to say that you continually engage in petty haggling with your suppliers. However, when the outcome of a procurement activity is critical to the organization's goals, a successful conclusion can never be in doubt: You will need to meet the goals and expectations of your ...