Procurement Process

Negotiation is a fundamental form of dispute resolution involving two or more parties (Michelle, M.2003). Negotiations can also take place in order to avoid any future disputes. It can be either an interpersonal or inter-group process. Negotiations can occur at international or corporate level and also at a personal level. Negotiations often involve give and take acknowledging that there is interdependence between the disputants to some extent to achieve the goal. This means that negotiations only arise when the goals cannot be achieved independently (Lewicki and Saunders et al., 1997). Interdependence means the both parties can influence the outcome for the other party and vice versa. The negotiations can be win-lose or win-win in nature.

Negotiation is an important part of the role of the purchasing professional. It is a skill that is learnt and training can help purchasing staff in understanding what is needed when negotiating something.

In this assignment I will be writing a formal report that will explain a typical procurement process, I will outline a variety of methods of supplier reimbursement and contract relationships; I will also outline the pros and cons of each contract type. As well as this, I will explain a typical supplier selection process through the use of Carters 10 C’s and a typical selection process model.

The buyer will analyze submitted proposals and make a selection based on the business which meets the majority of their requirements. The buyer may choose to negotiate the terms of the purchase with more than one supplier in order to get terms which are more favorable - lower price, finance options & better quality (Grewal, p. 214).

Negotiation is a fundamental process used in resolving conflicts, making business deals, and in managing working relationships with others. Negotiations occur for two reasons: (1) to resolve a problem or dispute between parties, or (2) to create something new that neither party could do on its own.

According to the Project Management Body of Knowledge (PMBOK) there are four phases in the project procurement process. The PMBOK Guide (Project Management Institute, 2008) defines these as Plan Procurements, Conduct Procurements, Administer Procurements,

When you’re choosing a supplier, you’re not just choosing a particular product, but the people who push that product as well. Issues or late shipments are inevitable, but when those things happen, you want to feel confident that you’re working with professionals that will solve things quickly.

Negotiations is for contracts exceeding $100,000 and when necessitates a highly technical product or service. The government issues a Request for Proposal that requests the product or service and the price. The RFP is subject to negotiation after submission. When the government is checking out the possibility of acquiring a product or service, it issues a Request for Quotation. The bid is given to the one that gives the government the highest advantage or value.

It is quite challenging to discuss about procurement management without stating the importance of its strategies. There are four main basic procurement strategies that serve different functions within a procurement management. To begin with, a “Partnership” strategy focuses mainly on constructing mutual commitment in long term relationship with suppliers. While a “Secure Supply” strategy aims to secure short and long term supply while reducing risk from suppliers. In addition, a “Category Management and E-Procurement solutions” serves as a tool to reduce logistic complexity, improve operational efficiency, and attempts to reduce the number of suppliers. Lastly, a “Competive Bidding” strategy emphasizes on obtaining the “Best Deal” for short term transactions with suppliers.(van weele) Each of these four strategies involves a unique purchasing methodology, which implies that the complexity is embedded in an individual strategic implication. Therefore, it requires different tools to accomplish the specific strategical characteristics. A business entity may need to support and execute procurement decisions with other strategic apparatus with analytical methods, including market analysis, uncertainty analysis, price forecasting, supplier relationship and along with others.(Harvard)

We should be prepared. Also, we need to hold firm to our principles. Do not forget we have something the supplier wants; they need us as much as we need them. When something is important to us, stick to our guns. Suppliers will respect us for it. Moreover, we do not be intimidated. We do not automatically accept the contract terms a supplier suggests/offers us. Remember that it is their job to get the best possible outcome for their company. However, that is our job too. Furthermore, acknowledging the strengths in the supplier’s proposal or positive past performances before identifying weaknesses can make them more receptive to considering our point of view. Additionally, we have to Control the Negotiations. We have to leading the agenda, tabling the objectives, and control the pace of the meeting all help to assert our position in the negotiation process.

Negotiation is one important part of both the professional and personal life in our everyday situations. It is critical for people to resolve disputes, distribute limited resources, and/or create something new that neither party could achieve on his or her own. Negotiations can range from coordinating project timelines with clients to asking for a raise to discussing holiday plans with family members.

In planning for my negotiation, I reviewed the Supplier Payoff Matrix for each of the issues to be resolved. The issues which were likely to offer least resistance were the Electronic Integration and the Inventory. The next issues that were likely to have some pushback were the Quality and lot size. We kept to the last the more contentious issues that included price, volume flexibility, development fees and contract term.

Global business environment has become more unstable, supplier negotiations have taken important new role on helping improve corporate competitiveness. The goal of most supplier negotiations today is no longer just to get the lowest price. It is also to find new and innovative ways to meet a wide variety of business challenges, often by tapping into the knowledge and expertise of the supplier community and a good relationship.

b) Another alternative should be using the negotiation method in order to develop a “win-win” situation. A negotiating party would have to be applied, “When a long period of time is required to produce the items purchased” (p 375). In these circumstances, suitable economic price adjustment clauses must be negotiated. Opportunities for various improvements may develop, such as the new manufacturing methods, new packaging possibilities, substitute materials, new plant layouts, and new tools. Negotiation permits an examination and evaluation of all these potential improvements. Competitive bidding does not. The advantage would be assurance of a long-term business with the Company along with reasonable profit for the supplier and reasonable cost for the buyer.

Negotiation is the process of two individuals or groups reaching joint agreement about differing needs or ideas. Oliver (1996) described negotiation as "negotiators jointly searching a multidimensional space and then agreeing to a single point in the space." Negotiation is a form of conflict resolution. When we negotiate, the first thing that needs to be established is whether we have two or more parties that have a common objective, but also differ in ideas when it comes to how they achieve the objective. The principle behind negotiating is to finding the middle ground that is suitable for both parties involved. Not all negotiation ends in satisfactory compromise, sometimes negotiations can take a long time to conclude