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What’s the Biggest Negotiation Mistake Procurement Departments Make?

We’ve recently written about the fact that many purchasing managers don’t negotiate at all when they speak with suppliers. We have also gone over some of the strategies that purchasing managers can use to successfully negotiate with suppliers. While this has allowed us to cover many of the best practice for procurement negotiations, there’s still another topic that we want to touch on.

Although many procurement departments don’t negotiate, there are those that make negotiations a standard component of how they run. However, just because a procurement department has a standard process for negotiating doesn’t mean that they’re doing things in an optimal way. Forbes recently covered a common mistake that’s made by procurement departments in the logistics space and other industries.

Not Knowing When to Give a Little

The negotiation mistake that the Forbes article addressed was procurement departments getting too aggressive with their terms and conditions. Specifically, this is an issue that has started to become quite widespread over the last few years. The problem with this trend is instead of using the industry standards that have been in place for a long time, companies are making the decision to come up with their own rules and contract terms. By doing this, they end up putting an unreasonable amount of risk on their service providers and carriers.

So, what happens when procurement departments put themselves in this position? Although they may be operating under the belief that they’re in control, the reality is that taking an overly aggressively stance can negatively impact the leverage that a purchasing manager has during the course of negotiations. Once a supplier realizes that they’re dealing with a department that has unreasonable demands, they’re going to be far less motivated to make the deal work than if they only had to meet in the middle on more reasonable terms.

How to Remedy This Problem

Since this trend has become a noticeable issue, many companies are looking for ways to remedy it. The good news is there are several steps that can be taken to get negotiations on the right track. The first is to hire and train the right candidates. By ensuring that purchasing managers understand the optimal approach to negotiating and have the skills to carry out this process, aggressive tendencies can be eliminated.

The other step that companies should take is ensuring they cultivate a culture that’s focused on a long-term vision. While it is true that really squeezing the terms of a deal can seem like a win, any gain is only temporary. If a company wants to build a mutually beneficial relationship that will help it thrive over the long-term, this is a mission that needs to be shared with everyone in the company.

Let Bellwether Purchasing Software help your company improve supplier neogtiations with our flexible and comprehensive purchasing software. Contact us today to see why Bellwether Purchase Software is the software to choose.

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May 12, 2015
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BY Bellwether
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