It’s Friday, which means we’re sharing another CPO Rising Listicle. Each list will include a variety of procurement tips, trends, insights, research, lists, strategies, and/or recommendations designed to help procurement teams improve operations. We’ll also include a summary graphic for you to share with your team.

Over the last few years, chief procurement officers have realized even more the importance of strategic supplier relationships, especially during times of crisis and disruption. A strategic supplier relationship generally entails building a true partnership based on collaboration and mutual decision-making. The days of beating down vendors on price (which is entirely appropriate in some categories) are being replaced with transparent negotiating and deal crafting that engages rather than repels suppliers to ensure their commitment to the CPO and enterprise.

Such engagement is crucial for several reasons. First, businesses rely on their suppliers for innovation to compete effectively in the marketplace. Second, in a market with limited capacity and assurance risks, sourcing teams that pursue an aggressive, price-only approach can create difficulties retaining and attracting top-tier suppliers now and in the future.  Also, suppliers that feel undervalued or mistreated are less likely to invest in or share innovations that could benefit the enterprise. Third, CPOs understand that strategic supplier partnerships can contribute to the competitive differentiators that organizations cannot afford to ignore.

Here are the “Four Most Important Things to Have on Hand When Negotiating a Supplier Contract:”

1. Research: In-depth knowledge of the market and competition, past performance of the supplier, and current industry trends are crucial to understanding the supplier’s position and ensuring fair and reasonable terms.

2. Goals: A clear understanding of your business’s goals and objectives for the contract is essential to know what you want to achieve and where you are willing to compromise.

3. Alternatives: Having alternative suppliers and contracts to fall back on is essential leverage when negotiating with an incumbent supplier. This provides a strong bargaining position and prevents the supplier from taking advantage of their position.

4. Communication Skills: Effective communication and negotiation skills are critical to success. This includes active listening, clear communication of expectations and requirements, and the ability to articulate a compelling value proposition for both parties.

Strategic suppliers play a critical role in the success of many businesses, and it is essential to treat them as partners rather than just vendors. By crafting deals that provide mutual benefits and maintaining open communication, businesses can build strong and lasting relationships with their strategic suppliers, ensuring a reliable supply of high-quality goods or services for the future.

RELATED RESEARCH

Help! My Organization is Too Small to Negotiate with Big Suppliers (Guest Post)

Contract Analytics: A View into Value, Risk, and Opportunity

CPO Rising Listicle: Five Key Characteristics of a Best-in-Class CPO

Using Contract Analytics to Uncover Value, Risk, and Opportunity from Within

Tagged in: Chief Procurement Officer, contract management, CPO, CPO Rising Listicle, Negotiate, Procurement, Strategic Sourcing, Supplier Relationship Management