(Solution) ROSHN CIPS PIN Stages of Negotiation in Procurement and Supply
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Description
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
Source:
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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(Solution) CIPS New Global Strategic Supply Chain Project
- The purpose of this project is to evaluate supply chain automation by leveraging Industry 4.0 technologies. The identified technologies include Artificial Intelligence (AI) and Machine Learning (ML) noted as critical for streamlining operations and obtaining value-for-money outcomes. This has been pursued by focusing on Wood Plc.
- To conclude, the generated findings of this report evidence WPC is today adopting the application of iSourcing in their procurement and supply management (PS&M).
- In the current project, through an evaluation of options for automation of the organization PS&M, the findings evidence the existence of different limitations hindering the success of their system. The issues of cost overruns, lack of collaboration, and inefficient supply chain as the organization is expanding its current operations have been noted to include limitations of their current sourcing.
- Success in the automation of their supply chain has been identified to lead to the following outcomes;
- Organisation achievement owing to automation of their supply chain, increased confidence and capability, talent management, and employee competency
- Improved stakeholders relations (a later section of stakeholders analysis) easing the change process. Through the iSourcing improvement, WPC would be in a position of harnessing technical and commercial evaluation processes.
- Increased and robust systems and policies which mitigate overall gaps in sourcing system transformation
- Today, only lower than 10% of the entire WPC resources are used to prioritize automation and IT integration successfully. Automation would improve the use of resources in their operations
- Involve their IT and finance departments to ensure within a period of 6 months they
- WPC needs to consider embracing sustainable practices as part of investing in their Industry 4.0 technologies
- Through the adoption of automation, better communication systems backed by AI and ML would be introduced to achieve 70% increased communication effectiveness.
- It is important to increase this through increasing collaboration and alignment of all their interests holistically
- Partnering with institutions for the provision of capacity development opportunities for the PS&M teams and other organizations for the success of the automation process
- Expanding their sourcing of Industry 4.0 technologies. This is to involve highly reputable global companies hence efficient operations and integration of AI
- Source of support from the government to ensure that they are facilitated in terms of policies and appropriate regulations to guide the automation process.
(Solution) ICS Learn CIPD Level 5 Reward for Performance and Contribution (5HR03)
(Solution) CIPS Advanced Practitioner Corporate Award (APDP)
- Within six months, PS&M personnel will be provided with chances for capacity building through partnerships with educational institutions to gain knowledge and skills for implementing category management.
- The PS&M would become more motivated in the long run by providing recognition and benefits for pursuing category management implementation.
- Within a year, an effective change management strategy would be pursued, focusing on tracking the change and spotting change resistance
1.0 Introduction
1.1 ADNOC Organisation Background
In this report, the organisation of focus is Abu Dhabi National Oil Company (ADNOC). This is for understanding the impact of contract terms and conditions on distribution of risk and power with their suppliers. This is an organisation which began its operation in 1971 and today is ranked as the leader in diversified energy group which is owned by Abu Dhabi Government (ADNOC, 2022). The organisation network of holistically integrated business has based their operations across the entire energy value chain assisting their capacity for meeting overall demands of the consistently changing energy markets. For remaining competitive, the organisation has allocated $15 billion for advancing and accelerating lower-carbon solutions, investment in new energy solutions and decarbonisation technologies for lowering their carbon intensity with 25% by 2030 and successfully facilitating their NetZero by 2050 target. The company has a network of fully operational companies that operate throughout the entire hydrocarbon value chain, handling tasks including exploration, production, processing, storing, refinement, and supply in addition to manufacturing a wide range of petrochemical products. I work as a Contract Engineer for ADNOC Offshore, one of the company's divisions. The offshore division of ADNOC is responsible for the delivery and development of oil and gas resources in the waters surrounding Abu Dhabi. With OPEX and CAPEX, ADNOC Offshore spends over 3,000 million dollars annually. The organisation structure is as illustrated in figure 1; Figure 1: ADNOC Organisation Structure1.2 Identified Category Management
The deployment of the iSourcing system, a technology-focused procurement procedure, was chosen as the category management in this study. The need for oil and gas has significantly expanded in the modern era since the Covid-19 epidemic. As a result, ADNOC is forced to spend money on equipment to help them process and refine more oil and gas products. In light of this, the team leader's responsibility is to see that an iSourcing system is in place and can be utilised to purchase the new machines that the company needs to upgrade its operations. Locally in UAE, regionally in the Middle East, and internationally in Western nations, this would apply. This project aims to produce a report outlining the implementation of the change approach. This is done while ensuring the team members and leader have the necessary abilities to carry out the plan successfully. Implementing the new category management strategy is the kind of change being sought. The learner will be the team leader throughout the full category management process since a team has been chosen to oversee the deployment of iSourcing. The practical approach would be utilising various tools and strategies that demonstrate leadership and best practices in change management, along with a focus on the category management data from the ADNOC firm.2.0 Change Management Approach
2.1 Introduction of the Required Change Process
In its Procurement Supply and Management (PS&M) budget, ADNOC had allocated roughly 10 million UAEis before the COVID-19 epidemic. Up to 5,000 domestic and foreign providers are currently utilised in this. Because of the significant financial allocation in PS&M, the ADNOC sourcing method is crucial to their operations in this scenario. Logistics, equipment, and facility administration are all purchased separately by the organisation, all of which fall under the organisation's primary spending categories of computers and technical systems. As a result, they lack a centralised system that would allow all departments to be involved in aiding the procurement procedure (CIPS, 2020). The Burke-Litwin Model (Coruzzi, 2020) can pinpoint the internal and external factors that contributed to the identified change. This model ranks the many change drivers according to their importance and provides evidence of each one in figure 2; Figure 2:Drivers of Change Model When taking into account the ADNOC organisation and indicated change, these elements have the following effects, as stated in Table 1: Table 1:Summary of the Drivers of Change in ADNOC Organisation| Factors of change | Explanation |
| External environment | Supply chain networks have been significantly impacted since COVID-19. ADNOC's ability to replenish stock, equipment, and machinery has been affected. Therefore, ADNOC would participate in strategic alliances by including diverse actors and intermediates in the complete value chain through iSourcing |
| Individual and oganisational performance | ADNOC's investment in iSourcing would reduce PS&M turnover, everyone's performance, and supply chain network satisfaction. |
| Leadership | To ensure iSourcing success, the PS&M will lead and manage efficiently. This inspires and guides other organisations to iSourcing success. |
| Mission and strategy | The achievement of ADNOC's aim to provide high-quality oil and gas products would be ensured by the deployment of iSourcing. The justification for this is to quickly and effectively engage highly qualified vendors. |
| Organisation culture | Implementing iSourcing would promote the collaborative and teamwork-oriented organisational culture of ADNOC. This is due to the platforms offered by iSourcing that provide suitable options for teamwork and collaboration. |
| Task requirements and individual skills | Employees at ADNOC lack the knowledge and skills necessary to deploy iSourcing. This deficit might be filled by offering possibilities for professional advancement. Implementation of the change would be successful. |
| Employee motivation | This report's proposal suggests that providing monetary and non-monetary rewards is necessary to encourage people to adopt iSourcing. This is for employing remarkably contemporary systems of practice. |