Negotiating and Managing in Supplier Relationships

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Table of Contents

Introduction
Meeting Preparation
Maintaining the Supplier Relationship
Conclusion
Reference

Introduction

The paper aims to outline and describe the main methods of managing and negotiating relationships with suppliers. The case study requires research and assessment of a potential company supplier, as well as a proper contract finalization procedure. In that way, the paper will aid in demonstrating the basic principles of promoting good relationships with suppliers while maintaining workplace efficacy.

Meeting Preparation

In order to develop a plan for negotiations and conduct them at a good professional level, some preparation is necessary. This preparation includes a wide range of issues, which can be decomposed into three main components for ensuring the negotiation process: information, psychological, and tactical.

The peculiarity of the components is highlighted as they primarily determine our behavior in negotiations and are the basis for choosing a strategy, methodology, and techniques for their implementation. Gathering information is one of the most important stages of preparation for negotiations (Rogers & Fells, 2018). The information can be conditionally divided into three categories: information about the company, the partner and the external environment in which negotiations are taking place. The first concerns the companys own goals, plans, and conditions that determine the solution of tasks. The second category includes the personal characteristics of the opponent, the financial situation of a company, product features, and business connections. Finally, the third category refers to the political situation, the market situation, and the conditions for the functioning of delivery vehicles, laws and regulations, tax, and customs legislation.

To implement this part of the preparation for negotiations, it is necessary to use several available vendor analysis tools: Porters 5 Forces and SWOT analysis. Michael Porters theory for assessing potential risks is to assess possible adverse events that may somehow affect the business in the future. Porters 5 Forces Influencing Business Development: buyers (customers), suppliers, current competitors, new competitors, substitute products.

Porters 5 Forces analysis is still more internal, since it studies the influence of factors on a particular company, considering its strengths and weaknesses. As a result, the business owner receives an effective business development strategy that minimizes risks in the future.

Advantages of Porters 5 Forces analysis:

Risk assessment. Using the methodology, the company can determine which factors may threaten the development of business with the supplier in the future.
Assessment of business processes. After analyzing the internal situation of the supplier, there will be opportunities to identify aspects that improve and enhance the companys activities.
Making competent decisions. Comparison of possible external threats and weaknesses of the supplier will allow the organization to develop a competent strategy for future development.

It is worth mentioning that this assessment method helps to make rational decisions. Thus, after the analysis, the company will receive a clear development strategy for several years ahead for each Porter Force. This will minimize the risks of losses and bankruptcy.

SWOT analysis is a collection of marketing and other investigations of an organizations or a single objects strengths and weaknesses. The method is based on utilizing the optimal external and internal factors to guarantee company success (Rogers & Fells, 2018). It is extremely important for every organization to be aware of the levers that it can control: the internal resources of the company, as well as the forces outside the impact zone. Thus, it will become the basis for studying aspects reflecting the current state of activity and the current position of suppliers.

Information about partners is crucial and can significantly affect the results of negotiations. General psychological preparation is necessary to create a certain climate of negotiations. Tactical training includes the development of such tactics, which allows the company to lead the other side and achieve the goal with minimal losses. The style of negotiations can be aggressive, overwhelming, friendly, or ingratiating. The choice of strategy depends on the subjective assessment of each others opponents. The ability to conduct business negotiations involves clear planning of communications with opponents. The sequence of actions is universal for each type and method of communication. The algorithm includes preparation, monologues and suggestions, discussions, bidding, and decision-making.

Maintaining the Supplier Relationship

Top Management Meetings

The presence of senior management at meetings with suppliers indicates the commitment of the organization to the supplier. Periodic meetings at which the top management of both organizations gathers provide an opportunity to discuss long-term strategies and mutual goals (Rogers & Fells, 2018). Meetings at the highest level contribute to establishing more serious relationships, which can demonstrate the suppliers interest. In addition, it allows you to control the entire process at the level of managers, which helps to avoid possible misunderstandings. This is manifested in the fact that decisions are made structured and clear.

Timely Payment of Invoices

Timely payment is of great importance for the cash flow of companies, especially small and medium-sized enterprises. It allows them to plan future activities and build more sustainable long-term relationships with their clients. This causes major issues for many businesses, compromising their liquidity and, in some cases, their survival. Another issue that occurs as a result of late payments is the amount of time and money spent by commercial businesses in recovering past-due obligations. Therefore, it is necessary to provide guarantees to the supplier that payments will be received on time. This will allow the company to establish more reliable relationships and strengthen trust.

Equitable Treatment of Suppliers

It is worth noting that an important factor is the timeliness of deliveries. Cooperation with several partners reduces the likelihood of supply disruption. In addition, it allows the company to choose more favorable terms of interaction. However, on the other hand, it is necessary to observe the ethical side of doing business (Rogers & Fells, 2018). The interests of various suppliers should be taken into account, and their manipulation should not be resorted to.

Periodic Supplier Surveys

Any organization should be confident in the quality of the delivered goods, the delivery time, and the optimal price. Surveys are an opportunity to find out the requirements and interests of the supplier regarding various aspects of the partnership. Thus, by maintaining contact with a partner in this way, it will be possible to create several opportunities to develop partner relations.

Supplier Development

The supplier performance management system is a tool for collaboration with suppliers to procure categories of materials and services that are of critical importance for business. It concerns all stages of cooperation selection, evaluation, feedback, and supplier development (Rogers & Fells, 2018). The purpose of such management is to make relations with suppliers more productive, to facilitate the adaptation of suppliers to business requirements and, as a result, to obtain additional economic benefits from procurement management. Thus, it is necessary to constantly strive to contribute to improving supply chains.

Conclusion

Ultimately, this paper has illustrated the main principles of managing and negotiating supplier relationships. Porters 5 Forces and SWOT analysis were defined as effective methods of initiating and conducting the negotiations. At the same time, the company can maintain the well arranged meetings with suppliers only through the continuous incorporation of time management skills, senior management involvement, and supplier surveys. Such strategies have repeatedly demonstrated improvement of company-supplier relationships and can be further enhanced by implementing modern applications and technologies.

Reference

Rogers, H., & Fells, R. (2018). Successful buyer-supplier relationships.Journal of Strategic Contracting and Negotiation, 3(3), 121136.

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