In the Learning Activity “Supplier Relationship Philosophies: Three Approaches” you learned about three negotiation philosophies. Watch the video in the Learning Activity “Negotiation Skills: 10 Tips.” Choose three skills from the video and relate each to the three negotiation philosophies. Elaborate as to why you think this skill is part of that specific negotiation philosophy. Which negotiation philosophy do you personally feel is the best? Why?
Video:https://www.youtube.com/watch?v=oy0MD2nsZVs&feature=emb_logo
Supplier Relationship Philosophies: Three Approaches Introduction As a supply chain manager, it will be your responsibility to successfully negotiate prices and terms with suppliers. As you read this section, think about the importance of creating strong relationships with suppliers. Supplier Relationship Management (SRM) Before you begin focusing on your relationships with suppliers, consider segmenting your current suppliers into four categories, as indicated in the image below. Figure 1.1 The strategic partners at the top of the pyramid are suppliers that are integral to your business. You would probably be in your strategic partners’ plans and they would be in yours. Your successes are intertwined. You are probably buying products from several of your strategic partners’ departments. There can be tremendous cost savings by building strong relationships with your company-wide suppliers. If a supplier knows they are on your strategic company-wide list, they are more likely to give you the best price and the fastest deliveries. Because you are a priority for your strategic partners, if there is ever a shortage of a particular item, you are more likely to get the item and other organizations will move to the back of the line for receiving. On the next level are strategic suppliers that are also key to your success, but not as intertwined. You buy the majority of your supplies from your core suppliers, but if you are able to buy the same products at a lower price or with a quicker delivery, you would more than likely switch. Your basic suppliers are generally suppliers from whom you are buying goods and services that are of less importance to your organization’s key initiatives. The category of basic suppliers changes often. Negotiation Philosophies The many approaches to negotiations can be categorized according to the nature of the market, the relative position of the buying organization and supplier and the nature of the outcome each expects from the relationship. The basic approaches can be described as: 1) win–win or cooperational, 2) win–lose or adversarial/competitive, and 3) lose–lose or confrontational. The dual-concern model considers the approach to be a function of the negotiator’s degree of concern for their own outcomes and for the other party’s outcomes. 1. Win–win or cooperational — The cooperational philosophy is likely to be used when both parties have a high degree of concern for their own and the other’s outcomes. Examples of this approach include most negotiations between partners and negotiations where the supply management professional and supplier want to do business with each other. 2. Win–lose or adversarial/competitive — The adversarial philosophy is likely to be used when the negotiator has a high degree of concern for his or her own outcome and a low degree of concern for the other party’s outcome. This is likely to occur if the supply management professional is in a very strong bargaining position relative to the supplier. Conversely, if the negotiator has a low degree of concern for their own outcome but a high degree of concern for the other’s outcome, then the approach is likely to be accommodating or yielding. This is likely to occur if the supply management professional is in a very weak bargaining position relative to the supplier. When both parties have moderate concern for their own and the other’s outcomes, the philosophy is likely to be compromising, where both parties split any differences. 3. Lose–lose or confrontational — The confrontational philosophy is likely to be used when both negotiators have a low degree of concern for their own and the other’s outcomes. Lose–lose negotiations are likely to occur when both parties prefer not to do business with each other but are forced to do so because of circumstances beyond their control. The choice of negotiation philosophy is affected by at least four other considerations: · The history of past relationships (positive or negative). · The belief that an issue can be resolved only if someone wins and someone loses. · The “mixed motive” nature of most negotiations, where negotiators want their own way but also want a continuing relationship. · A situation in which the negotiators are accountable to someone else for their performance. Note. Adapted from Institute for Supply Management, 2010, CPSM Study Guide. Copyright 2010 by Institute for Supply Management.