Procurement Fundamentals – Negotiation

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Introduction

This course provides an introduction to negotiation in a procurement context (i.e., negotiations between a buyer and a vendor/supplier). The objective is to provide the participant with a structured foundation in the preparation and conduct of such negotiations. Since practice is key in building up expertise in negotiation, case studies and exercises/games will be used to supplement lectures.

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Program Content

Session Topic Description
Session 1 Introduction to Negotiation in Procurement – What is Negotiation? What are the different types of negotiation?
– How to classify a particular negotiation?
Session 1 Preparation for Negotiation – Why is preparation important? What constitutes good preparation?
– How do you prepare for an important negotiation?
– What is BATNA? Reservation Price? How do you develop your BATNA?
– Barriers and Power in negotiation; Unintended consequences from preparation
Session 1 The People Factor – The “Opposition”: Knowing your “opponent”; Difference between organization and individual objectives; Organization levels in negotiation; Building relationships and trust; Cultural differences and similarities
– Your Team: Subordinates & Bosses; Aligning Roles & Responsibilities
Session 2 Due Diligence on Supplier Cost Structure – Importance of knowing the supplier’s cost structure
– Finding out about your supplier’s cost structure
– Identifying key cost drivers in your supplier’s operations for this RFQ
– How to best use this information
Session 2 Understanding your Supplier’s position – The real motivation behind your supplier’s need to negotiate
– Their financial situation and performance in the stock market
– Do they have specific objectives for this negotiation?
Session 2 Data at Your Fingertips – Tools & Analysis – Total Landed Cost / Total Cost of Ownership estimation analysis
– Overall market analysis for this commodity/component
– Impacts of FX variability, INCO terms, other specific negotiation parameters
Session 3 The 10 Negotiation “Rules” – Know your stuff; Establish a baseline; Involve your experts
– Check the market; Don’t bluff, but play your cards close
– Maintain integrity; Use tools available; Review all the facts
– Be unpredictable and fast; Find the way that’s a “win-win”
Session 3 Conducting the Negotiation – The Physical Setup; The Players; Making the First Offer?
– Distributive and Integrative Solutions; Tactics, Emotions and Conflicts
Session 3 Ethics in Negotiations – Questionable Tactics; What is Permissible?
– Lost Opportunities; Bluffing, Fraud and Lying
Session 3 The Post Negotiation Analysis – How well do you think you did? How was conflict handled?
– Type of solution achieved; Buyer’s and Seller’s Surplus Estimates
– State of the future relationship; Storing the “lessons learned”
Session 4 Negotiation Exercises – Case Studies & Negotiation Games

 

Faculty

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Prof. Dr. David Gonsalvez
CEO & Rector

Dr. Gonsalvez is the CEO & Rector at MIT Global SCALE Network’s Malaysian Institute of Supply Chain Innovation.