Supply Chain Negotiations: Creating Leverage

This is an excerpt of the original article. It was written for the May-June 2017 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2017

Trust hasn’t always been an element in supplier relationships; all too often buyers have been encouraged to carry a big stick and get tough with suppliers to get the best price—no matter the cost. That approach to procurement is beginning to change.

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Most of us experience the power of leverage for the first time as children on the playground seesaw: Very quickly we learn that if we place the board in the right place over the fulcrum, a small child can easily lift a much larger kid at the other end. But, there is more than just power involved; there is also trust. After all, if the smaller child jumps off the seesaw, it comes crashing down hard.

Leverage, and the power that comes with it, is a critical element of any negotiation. Yet, too many people are tempted to think of leverage as something they either have or they don’t; in other words, they see power as a product of the situation, not as the result of actions they can take. Just like moving the seesaw board forward or backward over the fulcrum to change the dynamic on the playground, there is much either side can do to find, build and develop leverage in any negotiation. By thinking more creatively, negotiators can find a wider range of leverage opportunities. Like most tools, the challenge is to pick the right one for the job: With the right tool, the work gets done faster and with greater success.

When meeting with clients, Mobus Creative Negotiating suggests that there is a spectrum of negotiations that runs from hard bargaining to creative deal making. We also suggest that there is a leverage spectrum. At one end of the spectrum is the consequential leverage that comes from showing the counterparty why they need you: Buyers may point out how important they are to a supplier’s business while presenting the options—or consequences—if the supplier does not cooperate. This is especially the case in one-time or highly contentious transactions.

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