Bob Stahl January 19, 2010 The Yankee Peddler Inn Holyoke, Mass. January 19, 2010 The Yankee Peddler Inn Holyoke, Mass. APICS Western Mass APICS Western Mass Earning Supplier Partnerships through Principled Negotiations PMAWestern New England PMAWestern Top Management Night

Bob Stahl Background years in manufacturing companies Started as “Schedules Coordinator” With help of Oliver Wight, became one of his early Class ‘A’ successes (1979) Became an associate of Oliver Wight Taught with Tom Wallace/Roger Brooks/Dave Garwood/ Walt Goddard & others Have worked with some of the best companies in the world Today = Coach, Educator, Author Have written six books with Tom Wallace - three used for APICS Certification S&OP Editor & Columnist for the IIF’s Journal of Forecasting - Foresight Head up consulting services for TFWallace & Company “Retired” = choices

Bob Stahl Agenda What’s changing? Segmenting suppliers  Traditional  Strategic Partners Principled Negotiation How to get started

Bob Stahl Value Adding Supply Chain Supplier Customer/ Consumer Warehouse Sister Plant/ Partner Plant/Factory

Bob Stahl The Mission Quality Cost Service  Response  Reliability  Variety Quality Cost Service  Response  Reliability  Variety To be the Best in Class Getting to AND... Diminishing OR Trade-offs are a Slippery Slope of Non-Competitiveness Trade-offs are a Slippery Slope of Non-Competitiveness

Bob Stahl Value Adding Supply Chain Supplier Customer/ Consumer Warehouse Sister Plant/ Partner Plant/Factory People

Bob Stahl What’s Changing? Blurring ‘boundaries’ Globalization Internet & e -Business Tools Geographically Spread Resources De-Massification (Mass Customization) Deconstruction of Economy of Scale Demand Driven (vs Supply Driven) Partnerships & Supply Chain Mgt.

Bob Stahl Solution One Size does not fit all: Traditional  Positioned Negotiation - Chester Karrass Strategic Partnerships  Principled Negotiation - Roger Fisher Segmentation

Bob Stahl Product/Service Relationship Matrix Cost/ Volume Product Performance Impact Interchangeable (2) Critical (4) Commodity (1) Performance (3) F.L. Thorne Partnerships X (Strategic Impact) (Financial Impact) Similar to Commodity, but Significant Cost / Volume Greater Time / Effort Justified Inventory Management an Issue Characteristics: Interchangeable, Performance Impact low, Acquisition Cost low. Key to Sourcing: Simplifying doing business - low cost. Concerns: Investing too much time; paying too much; need automatic way to see pricing is competitive. Relationship: Opportunity focused; little penalty for changing suppliers. Techniques: On-line catalog; vendor managed inventory; auto replenishment. Impacts Product Performance Little Interchangeability (Lead Time) Some Proprietary Competitive Issues Low Volume Critical to Success High Cost / Volume Distinguishing Factor (Core Comp.) Clearly Proprietary Issues Vital to Existence / Survival Much Time / Attention

Bob Stahl Caution... “ [e-business] can drive our tactical moves at light speed. But it cannot replace the strategic relationship building that still depends on extensive personal contact and a meeting of minds.” “Whenever you try to replace that, you are making a costly mistake.” John M. Paterson -- IBM VP & Chief Procurement Officer

Bob Stahl èWeb Communications ( , Catalogues, Search Engines, Web Pages, etc.) èOn line $$$ Transfers èB2B Communications (1st & 3rd Party) èPrivate & Public exchanges èTransparent (& trustful) communications (& data), that facilitate relationships èe-Commerce (Auctions, Reverse Auctions, etc.) e -Business Tools

Bob Stahl Supplier Partnerships “ I hardly mean to challenge the overall efficacy of the American system. But Americans ’ adversarial attitude toward anything is causing us untold harm in the changing commercial sphere. Our enterprises are at war. Outside the firm we go at it with suppliers... Inducing rival vendors to engage in bloody price wars, with quality [and response] often suffering. ” “But now, the most innovative firms are preaching heresy: Supplier Partnerships Tom Peters

Bob Stahl Positioned Negotiations A process whereby two organizations (or people) with a common interest enter a process with a pre- established position about their interest and the desired outcome; they participate in a ‘ give & take ’ exchange searching to influence the other party so that they can obtain a greater gain. Chester L. Karrass

Bob Stahl Principled Negotiations A method to decide issues on their merits rather than through a haggling process focused on what each side says it will and won’t do. It suggests that you look for mutual gains wherever possible, and that where your interests conflict, you should insist that the result be based on some fair standards independent of the will of either side. Roger Fisher

Bob Stahl The Method Mutual Problem Solvers Three components: Separate the People from the Problem Focus on Interests, Not Positions  Positions oppose, Interests do not ! Generate a Variety of Solutions before Deciding

Bob Stahl People vs Problem Substance vs Relationship Explicitly (separately) deal with emotions, perceptions, & communication problems Sincere people can disagree on substance, without destroying the relationship ‘ Learn to disagree without being disagreeable ’ Sam Raeburn 1949

Bob Stahl Interest vs Positions Position is a decision among alternatives Let ‘other side’ generate alternatives Positions oppose, interest do not (necessarily) Positions narrow focus to one side Story of the ‘orange’ The power of two!

Bob Stahl Generating Solutions Step #1 Problem Step #4 Actions Step #3 Approaches Step #2 Analysis In Theory In the real world Solution What might be done? Problem What’s Wrong? Roger Fisher

Bob Stahl The Method Separate the People from the Problem Focus on Interests, Not Positions Generate a Variety of Solutions before Deciding Insist on Using Objective External Standards (Benchmark) Know Each Other’s BATNA’s

Bob Stahl External Standard Use as a starting point - benchmark Fair procedure - one cut, other chooses Independent of the will of either side

Bob Stahl BATNA Best Alternative To a Negotiated Agreement Known to each other Can be a benchmark Not a ‘bottom line’ - a starting point Is not used for ‘leverage’ Achievable without any negotiation If exercised, relationship continues

Bob Stahl Negotiations

Bob Stahl Negotiations

Bob Stahl Learnings... Segment Suppliers Substance vs Relationship Principled Negotiations must be part of any Partnership Earn a Partnership; you don’t announce it Don’t e-liminate your Relationship

Bob Stahl How to Get Started After reading Getting to Yes... Map all suppliers on matrix Start where you are Establish an interest Start Small... Build on Success Gain Momentum Don’t get caught up in the hype Don’t e -liminate Relationships

Bob Stahl Making Change “In human affairs, the willed future always prevails over the logical future.” “Change happens one step at a time, by thinking globally [big], but acting locally [small].” Rene Dubos-1982 A Celebration of Life An essay

Bob Stahl Thanks for Listening 508/ /