To start planning, it’s important to first understand the objectives, market and suppliers, and conduct a SWOT analysis on both the buying and selling companies. This will help grasp the situation and inform the planning process.
Objectives
Documenting the intelligence gathered when obtaining information about contract objectives is highly recommended.
When trying to understand a negotiation situation, it’s important to consider these broad categories of objectives:
Price and non-price issues: To better understand the objectives related to pricing and non-pricing, we can compare office supplies with a capital asset or a critical part of the production process.
Stakeholders: Let’s examine how the identification of necessary materials or equipment takes place. When the MRP system requests raw materials to facilitate production, the stakeholders involved are manufacturing operations and finance. Their primary concern is to ensure a consistent supply at a reasonable cost. In contrast, if the request is for a specialized piece of equipment that will enhance the manufacturing process, such as an automated system, the stakeholders may be the same, but their level of interest varies. In such a scenario, operations focuses on the equipment’s performance and its long-term impact on production, including aspects like headcount, training, and efficiency. In the meantime, finance is focused on cash flow, profitability, and depreciation.
Relationship with Supplier: Before starting the planning process, it is essential to have a clear understanding of the different types of supplier relationships. Previously, we compared a vendor relationship with a strategic alliance or partnership-type supplier relationship.