Don’t let negotiations upset the apple cart

This is an excerpt of the original article. It was written for the May-June 2022 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2022

I recently returned from three days in Atlanta at the Modex trade show. Although advertised as a supply chain event, it’s really a materials handling automation show with a handful of logistics providers thrown in for good measure. Heading out the door to the airport, I had no idea what to expect. The two-year absence from the trade show and conference scene had me, and many of the individuals I spoke to before the show opened, wondering what’s next—not just for the show but for operations in general. If the turnout and the enthusiasm is any indication, I think supply chain is in pretty good shape these days, despite the disruptions we’ve…

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For a buyer working in supply chain management to say their world has become more turbulent is a vast understatement. Many buyers may find themselves in a scenario similar to the one faced by Taylor. In this era of never-ending change, there is a practical need for supply chain buying managers to consider the relationship history with their key suppliers and their strategic expectations so that they can better understand and predict potential supplier negotiation behaviors and outcomes when environmental changes occur, both internal and external to their organizations.

Some buyers may have a collaborative (win-win) strategic situation with their key suppliers, in which there is information sharing and concern for the success of both firms. Other buyers may be facing a competitive (win-lose) strategic situation, where their suppliers emphasize their own short-term gains. After repeated negotiations, buyers learn to adjust to their suppliers’ negotiation styles given their past history. What happens then to buyers’ levels of trust when suppliers change their negotiation strategy to a different style after a history of doing it the same way?

Further complicating buyer-supplier relationships are environmental forces or changes, both internal and external, that are out of the control of the buyers and suppliers alike. Internal changes could include new executive leadership within the supplier organization that changes a strategic emphasis either toward or away from more long-term collaboration with their buyers. And, externally, these changes could include items such as price changes—either higher or lower—in key product components.

These types of changes occur in the chaos that supply chain managers have faced recently as they contend with the pandemic, the growth of inflation, global unrest and the “Great Resignation.” Given that a buyer’s relationship history with a supply chain partner creates expectations, any deviations in negotiation strategies create confusion and questions. For instance, what happens to the value of the relationship and the commitment to the relationship when environmental changes occur? Further, how is the supply chain relationship affected when, in addition to these internal or external changes, there are also changes in negotiation strategy behaviors?

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