The editor of Supply Chain Management Review made an unusual request for the May 2023 edition. He asked this married couple to write an article about psychologic principles to empower negotiations. This topic does fit us. Mark regularly teaches conference audiences and corporate procurement groups on best practices in negotiations. Melanie is a medical doctor practicing in the field of psychiatry and teaching at the undergraduate, graduate and post-graduate levels as a tenured professor, as well as regularly speaking in the educational and medical communities on matters relating to intrapersonal and interpersonal relationships. So, let’s get started.
The place of negotiations in today’s procurement toolbox
Despite all the “eTools” in today’s supply management toolkit, negotiations are still the most utilized way to establish (and improve) complex business relationships. Most senior supply management professionals agree that negotiations are the preferred methodology for dealing with alliance and strategic types of supplier relationships—ones that account for a large proportion of supply chain expense.
This truth has been further compounded during the last two years as the balance of power in typical commercial relationships has shifted toward the suppliers, in combination with COVID supply chain disruptions and energy-induced inflationary price increases.
Let’s face it, a greater portion of the average firm’s procurement relationships have been exposed to renegotiations than ever before. It was decades ago that we last saw force majeure language being deployed in the commercial contracting environment anywhere close to current levels.
With so much pressure on buyer/supplier relationships, how can procurement leaders be more successful in the process of negotiations? How can professionals expand the power of negotiations beyond the boundaries of MDO (most desirable outcome), LAA (least acceptable agreement), and BATNA (best alternative to a negotiated agreement)? A greater understanding and incorporation of psychological elements may be the key to