Regardless of the industry, sector or function Commercial Negotiation is a key skill for Procurement & Supply chain professionals. Procurement & Supply chain professionals may be required to negotiate not only with suppliers but also with internal users, budget holders and other internal & external stakeholders. While it is possible to achieve a successful outcome to a negotiation without preparation or even by accident, this is unprofessional practice and not advisable.
To achieve value for money is very important in leather sector of Bangladesh. The increased demand of synthetic shoes resulted a continuous pressure to lower production prices, improving quality, complying social & ethical compliance etc. To achieve lower price maintaining a positive relationship throughout the supply chain is time demanding. Mastering Commercial Negotiation will help leather sector procurement & supply chain professionals to be confident to achieve business goals.
What is Commercial Negotiation?
A Commercial negotiation is a strategic discussion that resolves a commercial issue in a way that both parties find acceptable. In a Commercial negotiation, each party tries to persuade the other to agree with his or her point of view. By negotiating, all involved parties try to avoid arguing but agree to reach some form of compromise.
Negotiation – Common characteristics
- Involves two or more parties
- Existence of conflict of interests (or disputes)
- There is a willingness to negotiate
- Need to seek agreement
- Outcome achieved through influence and persuasion
- Parties seeking to satisfy tangible and intangible outcomes
Negotiation in the various stages of the sourcing process
Sources of conflict in commercial negotiation
- Price
- Quality
- Quantity
- Payment terms
- Risk share
- Terms & Conditions
- Dispute resolution method
Approaches in commercial negotiation
Collaborative win-win approaches to negotiation
- To achieve mutual agreeable solution
- Maximum return for organization
- Focus on common interests
- Non-confrontational
- Open to persuasion
- Maximizes return with larger time frame
Distributive win-lose approaches to negotiation
- To win as much as possible
- Maximize tangible gains
- Confrontational / argumentative
- Manipulates people
- Not open to persuasion
- Do not considers needs, interests, attitudes of the other side
Principles of Commercial Negotiation
- Separate people from the problem or issue
- Focus on interests, not positions
- Invent option for mutual gain
- Insist on using objective criteria
Author
Sheikh Nafiz Ahmed
MBA II Certified Supply Chain Analyst II
Experienced Leather Sector Supply Chain Professional
