Supply Excellence

Buyer-Seller Collaboration: Don’t Confuse Negotiations with a Relationship

August 6th, 2010 · by Tim Minahan · 4 Comments · sourcing, supplier management, supply management

Over on the International Association of Commercial Contract Management (IACCM) blog Commitment Matters, negotiation and contracts guru Tim Cummins shares some interesting research into the (im)maturity of buyer-supplier collaboration. According to a recent IACCM study, 46% of respondents feel that buyer-seller relationships are more mutually beneficial and collaborative than they were 24 months ago.

While that’s an improvement than in the past, Tim rightfully points out that collaboration is often more lip service than a committed initiative. And tough economic periods, like the one we just went through (are still in?) strain even those most committed to real buyer-seller collaboration.

Yet, my experience suggests that the post goes off base when it attempts to draw a correlation that broad use of online sourcing and spend management tools is responsible for poor buyer-seller collaboration. On the contrary, online sourcing tools actually improve buyer-seller collaboration for three key (if not more) reasons:

  1. Online sourcing tools bring a transparency and openness to negotiations that is often lacking from offline negotiations.
  2. Leading online sourcing tools enable greater buyer-seller collaboration during the negotiation process, often times allowing suppliers to provide alternative bundles, delivery schedules, or product or process innovation recommendations that can enhance the value of the good or service being purchased and take cost out of the system — without negatively impacting the supplier’s profit margins. Over on Ariba Exchange, my colleague, David Morel, does a great job of illustrating how online sourcing tools improve buyer-seller collaboration during the negotiation process.
  3. Finally, we must be careful not to confuse the negotiation with the relationship. Such online tools speed sourcing cycles 50%-70%, giving buyers and sellers more time to focus on collaboration and relationship management. (In fact, we’re seeing far greater demand for our supplier collaboration and management solutions from those companies with online sourcing tools than those without.)

Bottomline: Buyers and sellers certainly need to put more commitment into their collaboration oaths. But online negotiation tools and collaboration can not only peacefully co-exist but actually can enhance one another.

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4 responses so far ↓

  • 1 Tim Cummins // Aug 6, 2010 at 9:17 pm

    Tim, I think we are probably close on this one. Our study found that whereas most organizations had invested in spend management tools, relatively few have expanded those to include applications that asisst negotiation or relationship management. It is the exclusive focus on spend (and therefore acquisition price) that concerns me. Unfortunately, the tools are often misused or abused. It isn’t the tool that is wrong - it is the way it is too often being used.

  • 2 Emily // Aug 10, 2010 at 2:30 am

    Great article. If you’re interested in warehouse management and performance, check out the final post in Ryzex and Psion Teklogix’s series on warehouse performance and management at http://barcodeinformation.wordpress.com/. The last blog is titled “Tired of Being Average? Move the Warehouse Performance Needle!”

  • 3 Rachael Ellis // Aug 10, 2010 at 6:36 pm

    Thought provoking post! At Ocurem we work with lots of clients, in both elements, buyers and sellers and this is often a big bone of contention. The article gives some clarity, but it is often difficult to actually convince the “powers that be” that extra resources are required following the implementation plan. We always try and ensure that sufficient time is given within the plan for ongoing collaboration which needs time to mature but does bring results

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