Presentation on theme: "Part 4: Supplier Relationship Principles Principles that apply to Independent Contractor Agreements and to Purchasing in general."— Presentation transcript:
Part 4: Supplier Relationship Principles Principles that apply to Independent Contractor Agreements and to Purchasing in general.
Healthy Long-Term Supplier Relationships Dealing fairly with those we work with Maintaining personal and institutional integrity Achieving a Win-Win Relationship
Supplier Relationships The traditional price-based relationship with suppliers is changing to long-term relationships based on total cost, trust, flexibility, innovation and quality. Advantages Stronger partnerships-collaboration Better supplier performance Improved communication Increased product knowledge Increased trust Reduces adversarial relationships Is the lowest price the best value?
Establishing Supplier Relations Supplier qualification is based on sound business decisions and analysis— Seek reputable “best net value” suppliers. Be reasonably confident supplier can perform. Avoid financially challenged suppliers and those whose business practices might reflect negatively on BYU. (Unfair employment practices or shady reputation.) Review for favorable references or acceptable past performance. Do not discriminate on the basis of religion, race, color, or national origin.
Best Net Value - Sum of the Parts Quality Availability Final Cost Price Distribution-Delivery Warranty Issues Supplier Service-Performance Other individual considerations important (tech support, replacement parts, etc.)
Guiding Principles for Purchasing Negotiations Best = Meeting needs Quality. To some, “high quality” means fancy, ornate, expensive, or made with expensive materials. In the purchasing profession, quality means meeting the requesters needs completely and without defect.
Why we Negotiate Fiduciary Duty: Maximize Value of Resources Additional Duty: Dealing With Sacred Funds coming from Consecration and Sacrifice It Really Matters: Significant Savings Result Without Negative Impact on Supplier Relations
How are We Doing at BYU? Opportunity Losses occur when things are said or done that weaken our position relative to Seller’s position— making it impossible to obtain their best deals. Even though we all negotiate — Negotiation is a skilled discipline that requires specialized training for success. A real problem at BYU is people telling suppliers things that let them believe they have landed the deal—before Purchasing gets involved, or in the case of an Independent Contractor—before you have finished defining your needs. This severely limits our/your ability to add value.
Negotiation Defined: “The process of working out a procurement and sales program together, to the point of reaching a mutually satisfactory agreement.” “Procurement by negotiation is the art of arriving at a common understanding through bargaining on the essentials of a contract such as delivery, specifications, prices, and terms.” —Purchasing Principles pp. 228
A Professional Perspective: “I learned very early that in most negotiations success or failure is determined more by the actions, inactions, habits, idiosyncrasies, blunders, insights, and clever strategic moves of the individuals involved than by the terms of the agreement or other formal elements of the proposed transaction.” —Royce A. Coffin
Understanding Purchasing Negotiations There is a common notion—even among some business managers that someone always gets skinned in a negotiation. That one side always comes out a winner and the other side a loser. In purchasing negotiations this should never be the case.
Understanding Purchasing Negotiation (Continued) The plain fact is that by definition there cannot be a loser when negotiations are successfully completed. Buyers or suppliers are free to walk away from a negotiating session whenever things are not going their way. Then the contest is called off and there is neither a winner nor a loser. But when supplier and buyer agree on a deal, no one is defeated.
Understanding Purchasing Negotiation (Continued) A leading purchasing textbook puts it another way: “In successful negotiations, both sides win something... but the winnings are seldom equally divided. Invariably, one side wins more than the other. This is as it should be in business—superior business skills merit superior awards...”
Skillful Negotiation Moves the Price Toward the Left Side of the Win—Win Range, Producing Significant Savings While Maintaining Benefits for the Seller.
Win-Win Approach Assumes that both the buyer and seller will be better off entering into agreements. Seeks that both parties come away from the transaction deriving some gain or satisfaction, but not necessarily equal value. Encourages creative solutions. Suggests developing relationship where agreements are created ensuring performance by both parties.
Basic Negotiation Concepts Bargain from a Position of Strength: Negotiating strength can shift back and forth between the buyer and seller, even during a single negotiation. The buyer should be alert to those things that increase the relative negotiation strength or power of his organization and avoid anything that can weaken his relative position.
Sources of Negotiating Power Competition—freedom to choose other sources. Ability to buy continuously for years. The prestige of the University. Our financial strength. Credibility from the Church’s reputation Power of Planning. Planning dramatically increases negotiating power. Always go into a negotiation with a plan and objectives.
Timing: Successful negotiation requires that Seller’s time constraints seem to them to be more stringent than ours are. Nothing is worse than an after- the-fact order to shift the balance of power to the Seller.
After-the-Fact Monsters Getting arrangements made with Independent Contractors before any work is done provides advantages and mitigates problems: If the worker you want is not eligible other arrangements can be made before it’s a major problem. If he or she is not U.S. Citizens his/her payment is subject to 30% withholding unless Tax paperwork is complete. We lose out on copyright unless a “Work Made for Hire” agreement preceded the creation of Intellectual Property.
Teamwork Our objective in Purchasing is to delight you— our customer as we help add value when you have procurement needs. We like nothing more than to work with you to help you achieve success. We are happy to answer any questions. We want to work together to conduct the business of the university expertly, efficiently, and with integrity.
Teamwork We should conduct ourselves in a manner reflecting the highest values of the Church and University and in ways that cannot be misunderstood. Our conduct dealing with Suppliers and Contractors should result in Win-Win vs. Win-Lose.