earning supplier partnerships through principled negotiations

Bob StahlBob StahlBob StahlBob StahlJanuary 19, 2010The Yankee Peddler InnHolyoke, Mass.

January 19, 2010The Yankee Peddler InnHolyoke, Mass.

AAPICSPICSWestern Western MassMass

AAPICSPICSWestern Western MassMass

Earning Supplier Partnershipsthrough

Principled Negotiations

Earning Supplier Partnershipsthrough


PMAPMAWesternWesternNew EnglandNew England

PMAPMAWesternWesternNew EnglandNew England

Top Management NightTop Management NightTop Management NightTop Management Night

Bob Stahl www.RAStahlCompany.com

AgendaAgenda

•What’s changing?

•Segmenting suppliersTraditionalStrategic Partners

•Principled Negotiation

•How to get started


Value Adding Supply Chain


Supplier

Customer/Consumer

Warehouse

Sister Plant/Partner

Plant/Factory


The MissionThe Mission

•Quality•Cost •Service

Response Reliability Variety

•Quality•Cost •Service

Response Reliability Variety

To be the Best in Class

Getting to AND . . . Diminishing OR

Trade-offs are a

Slippery Slope of

Non-Competitiveness

Trade-offs are a

Slippery Slope of

Non-Competitiveness




SupplierCustomer/Consumer

Warehouse

Sister Plant/Partner

Plant/Factory

People


What’s Changing?What’s Changing?• Blurring ‘boundaries’

• Globalization

• Internet & e-Business Tools

• Geographically Spread Resources

• De-Massification (Mass Customization)

• Deconstruction of Economy of Scale

• Demand Driven (vs Supply Driven)

• Partnerships & Supply Chain Mgt.


SolutionSolutionOne Size does not fit all:

•Traditional Positioned Negotiation - Chester Karrass

•Strategic Partnerships Principled Negotiation - Roger Fisher

Segmentation


Product/Service Relationship Matrix

Product/Service Relationship Matrix

Cost/

Volume

ProductPerformanceImpact

Interchangeable(2)

Critical(4)

Commodity(1)

Performance(3)

F.L. Thorne

Partnerships

Partnerships

X

(Strategic Impact)

(Fin

anci

al Im

pact

)

•Similar to Commodity, but

•Significant Cost / Volume

•Greater Time / Effort Justified

•Inventory Management an Issue

•Characteristics: Interchangeable, Performance Impact low,Acquisition Cost low.

•Key to Sourcing: Simplifying doing business - low cost.

•Concerns: Investing too much time; paying too much; need automatic way to see pricing is competitive.

•Relationship: Opportunity focused; little penalty for changing suppliers.

•Techniques: On-line catalog; vendor managed inventory; auto replenishment.

•Impacts Product Performance

•Little Interchangeability (Lead Time)

•Some Proprietary Competitive Issues

•Low Volume

•Critical to Success

•High Cost / Volume

•Distinguishing Factor (Core Comp.)

•Clearly Proprietary Issues

•Vital to Existence / Survival

•Much Time / Attention


Caution . . .

Caution . . .

“ [e-business] can drive our tactical moves at light speed. But it cannot replace the strategic relationship building that still depends on extensive personal contact and a meeting of minds.”

“Whenever you try to replace that, you are making a costly mistake.”

John M. Paterson -- IBMVP & Chief Procurement Officer


Web Communications (e-Mail, Catalogues, Search Engines, Web Pages, etc.)

On line $$$ Transfers

B2B Communications (1st & 3rd Party)

Private & Public exchanges

Transparent (& trustful) communications

(& data), that facilitate relationships

e-Commerce (Auctions, Reverse Auctions, etc.)

e-Business Tools


Supplier PartnershipsSupplier

Partnerships“I hardly mean to challenge the overall efficacy of the American system. But Americans’ adversarial attitude toward anything is causing us untold harm in the changing commercial sphere. Our enterprises are at war. Outside the firm we go at it with suppliers . . . Inducing rival vendors to engage in bloody price wars, with quality [and response] often suffering.”

“But now, the most innovative firms are preaching heresy:

Supplier PartnershipsTom Peters


Positioned NegotiationsPositioned Negotiations

A process whereby two organizations (or people) with a common interest enter a process with a pre-established position about their interest and the desired outcome; they participate in a ‘give & take’ exchange searching to influence the other party so that they can obtain a greater gain.

Chester L. Karrass




A method to decide issues on their merits rather than through a haggling process focused on what each side says it will and won’t do. It suggests that you look for mutual gains wherever possible, and that where your interests conflict, you should insist that the result be based on some fair standards independent of the will of either side.

Roger Fisher


The MethodMutual Problem Solvers

The MethodMutual Problem Solvers

Three components:

• Separate the People from the Problem

• Focus on Interests, Not PositionsPositions oppose, Interests do not !

• Generate a Variety of Solutions before Deciding


People vs ProblemPeople vs Problem• Substance vs Relationship

• Explicitly (separately) deal with emotions, perceptions, & communication problems

• Sincere people can disagree on substance, without destroying the relationship

‘Learn to disagree without being disagreeable’Sam Raeburn 1949


Interest vs Positions

Interest vs Positions

• Position is a decision among alternatives

• Let ‘other side’ generate alternatives

• Positions oppose, interest do not (necessarily)

• Positions narrow focus to one side

• Story of the ‘orange’

The power of two!The power of two!


Generating SolutionsGenerating Solutions

Step #1Problem

Step #4Actions

Step #3Approaches

Step #2Analysis

In Th

eory

In t

he

real w

orl

d

SolutionWhat might be done?

ProblemWhat’s Wrong?

Roger Fisher


The MethodThe Method• Separate the People from the Problem

• Focus on Interests, Not Positions

• Generate a Variety of Solutions before Deciding

• Insist on Using Objective External Standards (Benchmark)• Know Each Other’s BATNA’s


External StandardExternal Standard

• Use as a starting point - benchmark

• Fair procedure - one cut, other chooses

• Independent of the will of either side

•


BATNABest Alternative To a Negotiated Agreement

BATNABest Alternative To a Negotiated Agreement

• Known to each other

• Can be a benchmark

• Not a ‘bottom line’ - a starting point

• Is not used for ‘leverage’

• Achievable without any negotiation

• If exercised, relationship continues


NegotiationsNegotiationsPos itioned

(Karrass)

Princ ipled(Fisher)

Soft Hard

Friends Adversaries Problem Solvers

Agreement Victory Wise Outcome

Concessions Demands Problem not People

Trust Distrust Indep. of trust

Change Position Dig In Focus on Interest

Offers Threats Explore

Disclose Position Mislead Position No Position

Yield to Pressure Apply Pressure Yield to Principle

Sacrifice Hunt Farm


Learnings . . .Learnings . . .• Segment Suppliers

• Substance vs Relationship

• Principled Negotiations must be part of any

Partnership

• Earn a Partnership; you don’t announce it

• Don’t e-liminate your Relationship


How to Get StartedHow to Get Started

• After reading Getting to Yes . . .

• Map all suppliers on matrix

• Start where you are

• Establish an interest

• Start Small . . . Build on Success

• Gain Momentum

• Don’t get caught up in the hype

• Don’t e-liminate Relationships


Making ChangeMaking Change

“In human affairs, the willed future always prevails over the

logical future.”

“Change happens one step at a time, by thinking globally [big], but acting locally [small].” Rene Dubos-1982

A Celebration of LifeAn essay


Thanks for Listening Thanks for Listening

[email protected]/226-0477

www.RAStahlCompany.comwww.TFWallace.com

[email protected]/226-0477

www.RAStahlCompany.comwww.TFWallace.com

earning supplier partnerships through principled negotiations

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