It’s time to ensure your contract negotiations are set for the busy season, also known as “peak season,” the busiest period of the year for supply chains—running from mid-August through December.
Peak season is often "the season" for procurement professionals. Businesses shift into top gear, working around the clock to deliver to customers and clients across the globe. It’s a time when procurement professionals watch their well-built strategies either hold strong or falter under the pressure of increasing demand and evolving expectations.
Right now, procurement teams are on the hunt for actionable strategies to fill in the gaps from last year and are looking ahead for fresh ideas. Evaluating your negotiation strategy should be at the top of the list.
Effective negotiation strategies foster the type of supplier relationships that provide value well through peak season and beyond. Here are five negotiation strategies to keep in mind:
1. Align Internal Teams
The first item on your list should be to align internal procurement teams with the express goal of gaining visibility into your supplier base.
It’s remarkable how many teams and business units are unaware they’re negotiating with the same suppliers. This oversight immediately impacts the source of your negotiation power. Time after time, suppliers will divide and conquer to negotiate with the weakest link — gaining a concession in a minor category and over time expanding it into major categories.
I’ve seen firsthand, while working in procurement at a Fortune 500, how misalignment negatively impacts the bottom line. I was walking through our open-plan office and saw a whiteboard with a list of supplier names for projects one of my team members was working on. A few days later, another team member in a different category came to me for advice on a negotiation — with the same supplier.
These two team members were unaware they were negotiating with the same supplier, at the same time! With this realization, we spent time during peak season aligning and building supplier profiles to give visibility across categories, projects, contracts, and negotiations.
Use this opportunity to discuss issues and common themes across categories, identify gaps and overlaps, and build a holistic supplier strategy and negotiation plan that supports broader organizational goals.
Peak season is like being in a foxhole. Build a strong, aligned team prepared to work together on common challenges, supplier disputes and internal bottlenecks.
2. Build Long-Term Supplier Partnerships
Once you have clarity into your full supplier list, focus on a long-term supplier strategy built on win-win agreements. Supplier relationships can get tense during peak season. Collaborative, long-term relationships built on trust are invaluable during these times.
Starting early is key. The faster you can communicate with your long-term suppliers on a plan for the coming year, the better chance you’ll have your capacity and procurement needs met.
If you can be the first book of business for a supplier, then you’ll gain influence and expand your range of power in the negotiation process.
3. Prioritize Needs Over Wants
One key component of win-win supplier relationships is avoiding manipulative tactics. Instead, your organization should embrace collaborative strategies that meet the needs of both parties. A clear understanding of your suppliers’ needs can help build creative agreements that stand the test of deadlines.
Discounts and competitive pricing are often top priorities. However, skilled negotiators know that value can often be derived beyond price to build win-win outcomes.Think joint marketing or promised delivery schedules.
Creating tension can be a helpful tool here. Lean into the power of silence. Put your demands out there. Lay out your needs, push the mute button and wait. Let the other side marinate in the silence and the tension it creates.
Oftentimes, negotiators feel the need to convince, explain or add color. “I need X, maybe you could think about A or B as a possible solution to X?” But by using silence, you allow the other side to be creative and then suggest options that you might not have thought of.
Here’s an example from my own experience. I was negotiating across the table from a long-term supplier and asking for a 5% savings or increased value over the next 12 months. I put the request out there and let the silence hang. The supplier sat for a moment and replied, “How about we stop fighting about cost reduction and pricing, and we try growing sales and profit?”
Together, we worked with our merchandising team on cross-selling and upselling opportunities as well as new product opportunities.This creative approach had a positive impact on profitability and sales growth for the company. Without that silence, this creative solution with a long-term partner may never have surfaced.
4. Plan Concessions
Win-win agreements require collaboration. Concessions are a big component of these collaborative agreements.
But that doesn’t mean conceding to any request. You should have a clear plan for every concession you make. Know every number or factor you’re willing to concede and what you need in return for that concession.
Look for opportunities to create mutual value during times of high demand. Acknowledging supplier or shipper constraints can often lead to collaborative and creative agreements. Think of concessions like longer-term commitments in exchange for priority service during peak season.
Conditionality should be in your toolbox as well. “If we can agree on X, we’re willing to do Y,” conversations drive trades that offer mutual benefits.
Demand planning can often change rapidly and at the last moment. I’ve seen firsthand how sometimes a customer didn’t forecast correctly and is now asking you to jump through hoops to help with their issues to meet seemingly impossible deadlines. Through proper concession planning, it is imperative to not be caught off guard by the final five-to-10 minutes of a negotiation, when underprepared negotiators end up making increasingly large concessions to reach agreement within a deadline.
Instead, plan the numbers and how you will exchange value early on. Look for trades that are of high value to your counterpart but are also of low cost to you.
When you make these concessions, always ask for value in return. In my own experience, I’ve even been able to leverage new lines of business beyond peak season. Concessions are an excellent tool to help you create win-win agreements out of high-stress situations for both your company and your customers.
5. Make a Plan
Top procurement professionals know that positioning your case well requires planning, especially during peak season. Multi-million-dollar deals cannot be left to chance. The key to thriving during peak season is starting early, making a plan and executing that plan. You can’t afford to scramble for a strategy.
Align internally to get a better understanding of your organization’s negotiation power. Get clarity of what you truly need from your supplier. What’s the theme you want to carry into your negotiation to build a stronger supplier partnership? What’s your seasonal plan?
Know how you’ll manage information-sharing. Set high targets. Build a concession strategy. Lastly, don’t forget to make sure your legal department is ready and on board to support your negotiation plan.
A Negotiation Strategy for All Year Round
These five negotiation tactics shouldn’t just be deployed at crunch time. They’re effective for building a solid supplier and procurement strategy that delivers ROI all year round.
Shifting from an adversarial mindspace to a collaborative approach with your suppliers builds a foundation with your suppliers that can withstand the stress test of peak season and any surprises that arise throughout the year. A clear understanding of your organization's position and a clear negotiation plan for each supplier are the first steps in your journey to profitable win-win agreements.
