1. Copyright © 2003 Americas’ SAP Users’ Group “Negotiations Requires Asking ” DR. RUSSELL MOREY, C.P.M. PROFESSOR EMERITUS – SUPPLY CHAIN MANAGEMENT WESTERN ILLINOIS UNIVERSITY MACOMB, ILLINOIS E-mail: rwmorey@direcway.com E-mail: RW-Morey@wiu.edu May 20, 2003

2. NEGOTIATING PROFILES Aggressive Compromise Integrative Accommodate Withdraw

3. MAJOR ELEMENTS FOR NEGOTIATIONS Important Considerations  What is the # 1 reason why people do not receive information from suppliers/customers?  How do I analyze the information received?  Be sure to include NAIC# for each supplier/customer when developing a supplier/customer database  Negotiating via the Internet requires written skills

4. MAJOR ELEMENTS FOR NEGOTIATIONS Asking The Right Questions – A Few Examples  How would you classify your business – labor or capital intensive?  Are you a division of a larger company?  Overhead costs are hard to determine  Be careful of asking questions that encourage “yes” or “no” answers

5. MAJOR ELEMENTS FOR NEGOTIATIONS Asking The Right Questions – A Few Examples  Be careful when asking provocative questions  Questions requiring explanation may be encouraged by the words “why, when, where, what, who, which and how”  If problem-solving behavior is desired, use “cooperative” questions

6. MAJOR ELEMENTS FOR NEGOTIATIONS Asking The Right Questions – A Few Examples  What is the current capacity level of your supplier/customer?  Is price affected by the ordering method used?  What are the credit terms with customers? Suppliers?  Are gifts and gratuities an issue?

7. MAJOR ELEMENTS FOR NEGOTIATIONS Listening  Make eye contact  Exhibit affirmative nods and appropriate facial expressions  Avoid distracting actions or gestures  Understand the other party’s needs

8. MAJOR ELEMENTS FOR NEGOTIATIONS Feedback  Focus on specific behaviors  Keep feedback impersonal  Timing is important  Ensure understanding

9. THE MOST SUCCESSFUL NEGOTIATOR EXERCISE: Identify or list 5 reasons why a supplier would desire to do business with your organization (you cannot list profit as one of your answers). 1. __________________________________ 2. __________________________________ 3. __________________________________ 4. __________________________________ 5. __________________________________

10. SITUATION You are purchasing a widget from a supplier. The material costs are 45% of the industry’s revenues, direct labor costs are 13% and energy costs are 10%. Your supplier is asking for a 15% price increase due to an increase in materials of 18%. What would be the justifiable price increase?

11. TIPS IN NEGOTIATIONS  Substance and relationships  Separate the person from the issue  What are the common interests between you and the other party? What are the needs of the other party?  Be creative  Use objective criteria  What do you want in return?  Understand supplier/customer costs

12. Copyright © 2003 Americas’ SAP Users’ Group Thank you for attending! Please remember to complete and return your evaluation form following this session. Session Code: 4107