Initial outcomes from a study are finding that while finance and legal are still seen to be the most powerful functions during the negotiation process, supply chain directors are becoming increasingly involved in initial negotiations with potential suppliers.
The six-year study, entitled ‘Director Level Perceptivities on Aspects of Supply Chain Management‘, to be released by Professor Douglas Boateng and the PanAvest Partnership this month, seeks to understand the perceptions held at director-level on aspects of Supply Chain Management by examining an array of issues related to negotiations, agreements, contracts and bargaining.
A total of 74% of the research respondents agreed that their organisation’s supply chain directors are involved in initial potential supplier negotiation processes, which is an increase of 20.8% from 53.2 % in 2009.
Initial results indicate that director-level understanding of the importance and place of negotiations in the supply chain plays an integral role in organisational growth and negotiations success.
Drawing on a sample of approximately 64 international organisations, including Fortune 1000, FTSE 250, and JSE 100 companies, as well as state-owned enterprises and government departments, the study examines and compares various director-level respondents ideas and understandings of the role of negotiations in supply chain processes.
A many as 72% of the respondents agreed that negotiations skills must be a core strength of supply chain management professionals, highlighting a clear understanding of the need for negotiation skills and experience within the supply chain management context.
Such negotiation skills should involve developing an understanding of both the organisation’s and the potential supplier’s requirements and capabilities, taking cognisance of the implications of a local, national or international context, recognising the strengths and weaknesses of both parties and establishing a need for authentic dialogue, and the creation of a win-win situation or agreement.
Background to the study
The study traces director-level perceptions of negotiations in the supply chain management environment from 2009 through 2013, and brings attention to current opinions surrounding the role of negotiations in long-term value creation.
Following interviews with various CEOs, CFOs, COOs, directors and officers from engineering, marketing, logistics, supply chain management, project management, procurement, and related industries, this study (due for release later in July 2015) will highlight current trends in supply chain negotiations procedures and practices.
Negotiations are increasingly becoming an important element of the supply chain management process. Used as a means to recognise each other’s needs and requirements, negotiations allow individuals or organisations to actively engage in dialogues aimed at developing mutual understanding and agreement. Good negotiation skills not only influence the outcome of specific transactions, but also impact on supplier relations and organisational success. Successful negotiations result in win-win relationships for all of the parties involved, and ultimately lead to long-term contracting benefits.