Pain Points in Procurement Series
When Supplier Negotiations Come to a Standstill
What to do when supplier negotiations appear to be at an impasse, why negotiations break down, and how to up your chances for success.
By Hugo Britt | March 9, 2023
Welcome to Una’s Pain Points in Procurement series. Each week, the Una team will explore one of ten common pain points impacting procurement today, and put forth actionable solutions to each of these challenges.
You’ve walked into the negotiation full of confidence, but the situation soon begins to unravel as you realize the supplier is refusing to budge on price. You have savings targets to meet, but you don’t want to pull the plug on this strategically important relationship – so what do you do?
This week, we explore the challenges and solutions involved when supplier negotiations hit an impasse.
Why do supplier negotiations break down?
- Inflexibility: If one or both parties are unwilling to compromise on key issues, negotiations can hit a standstill. This can happen if the supplier is unwilling to budge on pricing or if the buyer is unwilling to accept a lower quality product.
- Unrealistic demands: Negotiations can quickly break down if the buyer or supplier makes unreasonable or unrealistic demands, such as asking for a price that is significantly lower than market rates.
- Lack of trust: Negotiations can become difficult if there is a lack of trust between the supplier and the buyer. This can occur if there has been a history of broken promises or if there is a perception that one party is not acting in good faith.
- Poor communication: Ineffective communication can hamper negotiations if one party is not responsive or if there is a language or cultural barrier.
- Legal issues: Negotiations can become contentious if there are legal issues or disputes between the parties. This can occur if one party is suing the other or if there are disagreements about contractual obligations.
- Power imbalances: Negotiations can be challenging if one party has significantly more bargaining power than the other. This can happen if the supplier has a monopoly on a product or service or if the buyer is facing a deadline and needs the supplier’s goods or services urgently.
Supplier negotiations can break down for several reasons but knowing how to prepare head of time, and how handle differing viewpoints will up your chances for success.
How to increase your chances of success before supplier negotiations begin
Negotiation, they say, is 90% preparation and 10% execution. Doing your homework will dramatically increase your chances of a successful outcome.
Do your research
It’s difficult to find areas of compromise if you know little about your supplier’s context and objectives. Do your desktop research, and don’t hesitate to communicate directly with the supplier to learn as much as you can about their priorities.
Building relationships between the parties can help to build trust and make negotiations more productive. This may involve getting to know each other outside of the negotiation process or finding ways to collaborate on non-negotiation related projects.
Know your goals
What would be the best possible outcome for your organization? What would be the minimum acceptable deal? What would you consider to be a fair deal? Asking yourself these questions before a negotiation will put you in an excellent position to know your boundaries as the conversation evolves.
Prepare your BATNA
Your BATNA (Best Alternative To a Negotiated Agreement) is your backup plan if the negotiation doesn’t work out. Just having a BATNA in place will give you confidence and leverage in the negotiation.
What to do if supplier negotiations hit an impasse
There are several approaches that can be used to resolve a standstill. Here are some suggestions:
Take a break
If negotiations have become heated or if the parties are stuck, taking a break can be helpful. This can allow both parties to cool down and can provide an opportunity to reassess the negotiation and identify new approaches.
Revisit the objectives
When negotiations break down, it may be helpful to revisit the objectives of both parties. This can help to clarify the underlying interests and needs that are driving the negotiation and can provide a basis for finding common ground, or “win-wins”.
Identify areas of compromise
Bring in a mediator
If negotiations have become acrimonious or if the parties are at an impasse, bringing in a neutral third-party mediator can be helpful. The mediator can work with both parties to facilitate communication and help identify areas of agreement.
Seek legal advice
If there are legal issues that are preventing negotiations from moving forward, it may be necessary to seek legal advice. A lawyer can help to clarify the legal issues and provide guidance on how to resolve them.
Consider changing your approach
Sievo lists seven different types of negotiation ranging from competitive to compromising. Be flexible and adapt to the situation by switching approaches mid-negotiation if necessary.
Explore alternative options
If negotiations have broken down completely, it may be necessary to explore alternative options. This may involve finding a different supplier or re-evaluating the need for the product or service altogether.
Skip supplier negotiations altogether
Think outside the box and skip the negotiation stage altogether by partnering with a group purchasing organization. As a GPO, Una has already done the hard work for you by standing up a portfolio with over 5,000 pre-negotiated supplier and technology vendor contracts.
Alongside incredible savings made possible by leveraging over $100 billion in buying power (Una members see an average saving of 18-22%), joining Una dramatically increases your speed-to-savings by leaving the sourcing and negotiation process to us.
Learn more about Una membership and how we can help improve your supplier relationship experience: