(Solution) ROSHN CIPS PIN Stages of Negotiation in Procurement and Supply

Solution

Stage 1 – Preparation

Preparation is essential before entering any negotiation. It includes identifying and defining the problem, understanding the issues involved, generating alternatives or options, and evaluating them to select the most appropriate approach. This groundwork lays the foundation for a productive negotiation process.

Actions in Preparation:

Identify and Define the Problem: Clearly state the negotiation objectives. For instance, if negotiating with a supplier on price, clarify any cost constraints or desired payment terms.

Understand the Problem: Research the supplier, their market position, and any external factors impacting them (e.g., supply chain disruptions).

Generate Options and Evaluate: Consider alternative options, such as adjusting quantities, extending lead times, or introducing additional suppliers. This flexibility prepares you for potential compromises.

 Stage 2 – Open

In the opening stage, the negotiation begins with setting the tone. This includes making an opening statement, presenting the initial offer, and establishing rapport. The opening can vary from warm and friendly to tough, depending on the negotiation strategy.

Key Points in Opening:

Opening Statement: Outline your position, reasons for the negotiation, and set expectations. For example, if the negotiation is centered around quality improvements, an opening statement might stress the importance of high standards in your industry.

Building Rapport: Small talk or open questions at the beginning can help build trust and reduce tension. For instance, asking questions like, “How has your production been impacted by recent supply chain issues?” demonstrates empathy and helps the supplier feel heard.

Example Tactics: Using a “warm” opening can be effective in building a collaborative environment. On the other hand, a “tough” opening stance might be suitable for hardline negotiations where firm boundaries are needed.

 Stage 3 – Test

In this phase, one checks the believability of the other party by probing questions in order to further establish that party’s agenda and limitations. This is the stage that defines the difference between principled (interest-based) and positional (competitive) negotiation.

Testing Tactics and Questions:

Probing Questions: These assist one to discover the real needs of the other party. Issues of the form, “How do you feel about this contract?” are examples of the technique as they expose interests.

Jam Today, Jam Tomorrow Tactic: Give a supplier or vendor something tangible in return for a promise of even greater gain in the future contingent on satisfactory performance.

Good Cop, Bad Cop: This is when one member of the interview adopts more of affable and another aggressive tone. For example, one negotiator may claim to be sensitive to the supplier’s concerns while another may make some kind of threat implying that everything must be on time.

 Stage 4 – Propose

More so, in the proposal stage, one makes specific productions in accordance to the information obtained. This stage is all about staking out into positions and bringing out remedies for the problems put forward in the testing phase.

Proposing Tactics and Questions:

Hypothetical Questions: These are employed to find out what the other party may be willing to do but not what he is willing to commit himself to do. For instance, when asking ‘If we could shorten delivery time by a week, could you give us a discount?’ the supplier is asked about his versatility.

 Stage 5 – Bargain

The bargaining phase is basically when the two/ parties start on a haggling/tantuning of back and forth offering of concessions for counter concessions. The latter may entail employing a range of bargaining strategies that help to restate, reinforce, or lead to agreement and settlement.

Bargaining Tactics and Questions:

Clarification and Summarization: It helps to keep you from confusing each other and set correct expectations to see where each one stands in the negotiation process. For clarity, words like these are powerful; “So let me understand you correctly, we do agree with the changes to the payment options, yes?”

Hypothetical and Leading Questions: “If we can compromise on what has been proposed at X, could you give somemthing on Y?” persuades the persons towards the right direction of the negotiation.

Tracking Progress: Recording of concessions and agreement in writing or in electronic form is crucial at this stage because the other party may withdraw given statement or offer.

Conflict Resolution: In this case, the Thomas-Kilmann Conflict Mode Instrument can be used to determine when to assert, when to accommodate, when to avoid and when to cooperate by comparing your governance model to the relevance of those negotiation points.

Context of Concessions: In order to clarify what concessions mean in the context of negotiations, it is necessary to understand that concessions are the changes that the counterpart makes in the course of turning into a mutually beneficial agreement. They can concern changing some of the contract clauses (price, quantity, quality, and location). It means that the goal of concession is reached when the conflict finally brings parties to a point in which no party feels that it has been defeated all together.

In this regard, we can propose the following setting of the table format that can be used to track concessions under different aspects in a negotiation. After that, the data in this table can be best represented in graph to illustrate whether there were some trends to the concessions and which area was fluid and which was fixed.

Table 5:Context of Concessions

Source:

Elements of Concession Law

  Price: Offering certain amount of price concession or coming into the consensus regarding the cost changes. A “must” here refers to the fact that these components cannot be questionable should you plan to achieve the target price.

Quantity: The number of units or quantity to be supplied, where like means that the buyer may opt for less units if other stipulations are met.

Price of Fabric: An essential tool in the making or creating process. Cost containment is critical, thus classified as a “need-to-have” with reference indicators that incorporate numbers such as R;20.

Location: The geographic location to minimize transportation costs or enhance the supply chain ease of the supplier or delivery point. This might be negotiable, get represented by “like”.

Shipping: Shipment or delivery related concessions such as free or free or slashed shipping prices can be huge bargaining tools particularly when in cases of huge or cross continental orders.

Postal Card: Additional amnesties are brand related and include such brand impulse items as custom postal cards. Treated “like” as it’s okay to bargain literally in the context of buying drinks at a bar.

Construction (Materials): The current need of designing and developing or procuring material to the required quality or sustainability standards, for achieving the quality goals, is a “must” activity.

Warehouse Location: Near perceptions by customers, for instance, shortening the distance to the firm or avoiding extra costs in delivery. To put it in simple terms, it is a “must” If, however, mere formalism and the organizational and communications challenges of logistics are prioritized.

License to Operate: Suppliers checked to meet legal obligation to do business, a necessity when dealing with such individuals.

Milestone Payments: Sequential arrangement of payments in proportion to various stages of a project completion, thus mitigating risks connected with accounts receivables and promoting higher performers’ efforts.

Warranty: Time period of warranty of the goods or service rendered, this is an adjustable factor as far as suppliers are concerned.

Latent Defects: Two parties’ commitment to the issues of hidden defects and their responsibility within specified time, which is important for creating stability in the long term in the context of the project.

Figure 7:Concession Categories

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 Stage 6 – Agree

In the last step of the negotiation, the contents of a negotiation is reviewed and approved by both the bargaining partners. It is also a chance to employ such strategies as ‘Higher Authority’ to confirm all terms.

Closing Tactics and Confirmation:

Higher Authority: This involves the practice of leaving the last decision for an absent party so that other can take his/her place in the event of a hitch. For example, “I will have to consult with directors/executives before signing off for this.”

Closing Questions: Leading questions as, ‘So, do we have a deal?’ are inclined towards getting a yes or no answer. Here closed questions can all the parties to the agreement realize and states the details in clearer terms.

In this activity of a principled negotiation, which focus on a win-win situation, the goal is to ensure that both parties gain satisfaction. A positional negotiation may culminate with higher emphasis placed on the compliance with the stipulations hence reach an impasse.

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