File Name: negotiation in purchasing and supply .zip
Negotiation is essentially relating to quality, date of delivery, prices etc. As a result of negotiation, the supplier reduces the price. In case of repeat orders, prices negotiation may take place even before receiving the quotation if there is an increase in price.
Negotiation refers to trading deliberations which generally lead to lowering of prices by the vendors. However, it would not be proper to think that negotiation supply refers to bargaining for lower prices. In a broad sense, negotiation aims at obtaining the maximum value of money spent on purchasing.
The purchase manager must be skillful and well informed. His skill of negotiation improves with every fresh purchase. Negotiation covers all aspects of business and not just price.
It is a decision making process. It requires changes in drawings, designs and specifications. An agreement should be reached as a result of negotiation. An experienced negotiator seldom allows the negotiation to break down. For this purpose, all issues have to be organised effectively. Unions develop skills of highest order for negotiation and we can learn a lot from unions in this regard. Labour leaders make themselves fully equipped before entering into talks with management. The authority of the vendor to sign the contract is much superior.
The best bargain is to ask the supplier to justify this price, quality, quantity etc. A good offense is the best defense. During negotiations, if tempers go very high, it is better to ease the tension by cracking a joke or a coffee break.
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In this series freelance author and supply chain expert Elaine Porteous explores core topics in procurement. This post has some edits and additions by the Sievo team. Commercial contracts that run smoothly throughout their lifespan are a rarity. So much can go wrong: uncontrolled price escalations, delivery problems, payment issues, unexpected changes in the market, miscommunications or equipment failures. Negotiating the terms of a contract must take into account all of the above. Depending on the commodity or service, the basic elements of price, delivery, quality, service, payment terms and other operational issues need to be agreed.
In many industries the balance of power has shifted from buyers to suppliers. Companies that have gotten into a weak position need to tackle the problem strategically, the authors argue. They should consider the following actions and implement the least-risky one that is feasible for their organization. This is the easiest approach. Companies can consolidate their purchase orders, rethink purchase bundles, or decrease purchase volume.
Negotiation is essentially relating to quality, date of delivery, prices etc. As a result of negotiation, the supplier reduces the price. In case of repeat orders, prices negotiation may take place even before receiving the quotation if there is an increase in price. Negotiation refers to trading deliberations which generally lead to lowering of prices by the vendors. However, it would not be proper to think that negotiation supply refers to bargaining for lower prices.
Negotiation is communication between two or more parties with the desired outcome of reaching a mutually satisfactory agreement. Negotiation can take place between a procurement professional and parties within the supply chain for a variety of reasons. Negotiation is used with the intension of all parties reaching an agreement. The ideal outcome is win-win but this is not always achievable.
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