Tag Archive: negotiations

Sequoia and the Power of Silence

August 8th, 2019

My best friend from high school and college was in town recently and we went to Sequoia National Park. First, I must say, what a ride to get to Sequoia on winding, mountainous roads! Once we arrived, we went to the ‘Trail of 100 Giants’, and it was impressive! These Sequoias were over 1500 years old, and gigantic. The largest tree has a diameter of 20 feet and is over 220 feet high.

Yet what stood out was the power of silence. You could hear the rustle of the wind in the trees. It sounded similar to sitting by the ocean. It certainly was a calming and humbling experience as the silence and the sounds of nature overpowered everything else.

Have you ever thought about the power of silence? Do you find it to be more effective than 1000 words? In a business setting, silence can speak volumes…

One tip to implement this week:
We all hear the advice to stop and listen.  Yet, how often are we thinking about silence? The most powerful speakers know the power of silence. The dramatic pause will emphasize just the right words. Certainly the best actors use this technique expertly, and we are putty in their hands!

Or have you thought about how not answering immediately answers the question? For example, at one client, I admit that after a particularly grumpy executive who didn’t want to support our project told me that he didn’t think consultants were valuable and didn’t want to talk to me to answer my questions, I was silent because I was thinking about how to respond that would be productive. Sometimes, it is better to be lucky than brilliant! In this case, since I didn’t respond quickly, he ended up filling the proverbial silence (since we weren’t communicating in person) and came back to me and agreed to do exactly what he just said he wouldn’t do. A light bulb went off that there is power in silence!

Silence is extremely valuable in negotiations. Have you noticed that whoever is silent gains the upper hand? That’s because we are typically uncomfortable with silence and rush to fill the gap. Next thing we know, we’ve given away more power and information than we intended, and we are behind in the negotiation. Yet I have to say, silence used as a manipulative strategy will not achieve your intended result. People will pick up on whether you are genuine or not.

Consider silence instead of a long response the next time you are going to open your mouth in a high stakes communication. Let me know how it turns out.



The Resilient Supply Chain: Do You Have Vendors or Partners?

December 1st, 2018

Since we did research on “The Squeeze” for a speech on the the squeeze in aerosapce (meaning:  how does the supplier in the middle between the Tier 1 suppliers who supply final assembly parts for an airplane and the powerhouse mills survive, or preferably thrive), we have been thinking a lot about the supplier relationship.  Coincidently, we also heard a lot on this topic at the Association for Supply Chain Management (ASCM/APICS) international conference as it is a hot topic across all industries. There was an almost identical discussion occurring with retail and the consumer goods industry. Last but not least, all of our clients are seeing the relevance of this topic.

What is the “right” answer?  Of course, it depends!
To manage “the squeeze”, one of the keys is to create partnerships with your key suppliers.  The rest can be vendors since they are not core or significant to your success. However, your key suppliers must be partners and collaborators.  For example, one of the best ways to handle the middle position in the aerospace world is to bring your customers and their demand together with your suppliers and their capabilities.  

Here are a few ideas that all depend on being a partner:

  • Collaborate with suppliers on new ideas/design concepts to reduce materials and waste for you AND up your supply chain.
  • Become a partner of your customer and gain access to demand information as it becomes available and help translate that into a benefit for your customer, you and your supplier.
  • Leverage pricing and volume across the supply chain for a win-win-win.

Although these ideas relate to aerospace, the same concept applies with every client.  When I was VP of Operations and Supply Chain for an absorbent products manufacturer, we used these same concepts to find win-win-win solutions in your supply chain.  We partnered with key vendors to redesign materials (that performed better at a lower cost), redesign packaging, reduce waste in our manufacturing process which required teaks and collaboration with both material and equipment suppliers and more.  By following a partnership route instead of the “vendor” negotiation/beat up on price route, we turned our situation around from bad to good.

We found private equity backers who wanted profitable growth.  However, soon after, the market changed and oil and gas prices were continually rising which significantly impacted our material costs (and were unavoidable) while our private equity investors still expected the same profit improvements as before.  Our business was also heavy in transportation cost since the product was bulky which was also an issue with rising oil and gas prices. Thus, we collaborated with customers, material suppliers and freight suppliers for win-win-win solutions. It “worked” and we were able to offset the price increases while growing the business in a profitable and scalable way.

These types of situations are common in today’s business environment.  

Do you view your suppliers as vendors or partners? And who are you hiring to manage these relationships?  Transaction-oriented purchasing folks or strategic relationship procurement resources?

 



The Resilient Supply Chain: Does Supplier Negotiation Work?

October 29th, 2018

In today’s Amazonian environment, it is quite clear that the customer’s experience is #1.  It doesn’t matter what issues you have.  If you cannot make sure that your product or service is delivered on-time with a value-add at a reasonable price, you will lose the business.  

The Squeeze
In talking with a group of aerospace CEOs who are being squeezed between the Tier 1/2 suppliers (those who supply Boeing and Airbus with plane ready parts) and their suppliers who are metals suppliers (mills/metals service centers) and outside processors, it is a tough position to hold!  However, just as Mirna Elnar, CEO of Acrua Spas said in our supply chain resiliency video series, there is always a solution when you think innovation.

The Win-Win
In this example, many of the suggested solutions from executives and procurement resources alike were to find opportunities to redesign/improve the product and process to achieve a “win” for the Tier 1/2 suppliers (improved manufacturability with better efficiencies and/or less scrap, less materials while maintaining specs/ performance, having the “right” inventory in the “right” place at the “right” time etc.) while also achieving a “win” for the CEO (better margins/ better cash flow) and ideally a “win” for their suppliers (more predictable demand, etc.).  A win-win-win is achievable if you look hard enough.

A Dose of Reality
This relates to a situation I found myself in while VP of Operations & Supply Chain for a mid-market manufacturer.  We found private-equity backers and were able to make cash flow by the “skin of our teeth”. We even were able to convince suppliers to take a haircut.  So far, so good. Then, oil and gas prices rose which impacted 70% of our material cost which impacted 70% of overall cost. NOT good. Also, we found that our product lines were all mixed up (which ones cost less to produce vs. the sales price for various customer segments) because we had recently merged three companies into one.  Also NOT good.

Our customers were a bit angry about service issues that arose when we cut over to a new system and merged the three businesses into one.  Also NOT good. And the largest segment of the business hadn’t updated products in years because they planned to sell and were desperate need of an upgrade to grow sales.  A fact but also NOT good. Lastly, our product is light but fluffy (which makes it larger in size) which carries a high transportation cost. NOT good either. But we had good suppliers and an innovative and committed team.  GOOD! So, how did we turn this into a “win-win-win”?

We decided to kick off a redesign project to find a way to straighten out the product tiers, improve performance of the product, reduce the cost of the product and reduce the freight cost associated with the product to boot.  A bit of a tall order? Yes, but a challenge as well!

We were successful in achieving ALL of these objectives by turning supplier negotiation on its head.  Instead of demanding price concessions, we partnered, provided upfront information on our objectives (including cost reduction objectives), collaborated on the design of new/improved materials, redesigned products and packaging, collaborated with customers to make sure we aligned with their needs and priorities, collaborated with equipment suppliers to put it all together and turned supplier negotiation into customer collaboration. 

The Result? We achieved a win for our customers, our business (and therefore our private-equity backers) as well as our suppliers.  There are too many people to thank but a quick shout out to Bill Weber, Keith White and Rick Finlayson seems appropriate.

Are you stuck in thinking about cost concessions or are you looking for the “win-win-win”?