Negotiating with Bullies

By Rosemary Coates, President of Blue Silk Consulting
July 07, 2014 - SCMR Editorial

I am in Singapore this week, teaching a Strategic Negotiations Workshop for the Asian Supply Chain (3PL) division of a global transportation company.  The class of about 20 Supply Chain Managers came from across Asia (Singapore, Malaysia, Japan, China, and Korea) to attend.  It was truly an honor to work with these very talented and extremely smart people.

But their frustration with Supply Chain and Logistics customers was palpable.  They told me story after story of negotiations that broke down because their customers were solely focused on reducing prices, including squeezing the last fractions of pennies out of 3PL services.  Customers have become bullies they said. Most of their customers are represented by buyers from headquarters assigned to the contracts; professional buyers with little or no understanding of Supply Chain strategies.  Very often these buyers have only one thing in mind: reducing prices and they won’t tolerate discussions about anything else.  They don’t see the bigger picture and don’t understand the value-added components of 3PL services.

My students were desperate for strategies and tactics to help them out of these “price reduction only” discussions with their customers and broaden the conversations.  We worked hard to develop some effective strategies for negotiating with buyers and bullies who focus on price only.  These include:

1. Every time a customer asks for another price reduction, suggest trading for something in return. Ask for something of value back such as move volume, another division, another project.  Never concede, always trade.
2. Keep opening the conversation and adding value to the deal by suggesting additional services or things that cost you little, but represent big value to your customer. 
3. Focus on some new goal that you both want in the future and trade your research for their additional business.  RFID is a good example where research and costs can be shared.
4. If the buyer still refuses to budge on getting price reductions, and you are in a stalemate, try escalating the conversation to a C-level executive.  Try organizing a meeting between your executive and your customer’s executive.  Sometimes executives can break the log jam.

Ultimately, if nothing works, you may have to make a difficult decision and part ways with the customer.  It makes no sense to waste your time and valuable resources on unprofitable and unreasonable customers. 

There is a lesson here too, for buyers of 3PL services.  Third Party Logistics is a relatively low-margin business.  When negotiating with your 3PL, remember that they also need to make a profit margin to stay in business.  In negotiations, stubbornness and demanding price concessions with no justification will make you appear uncooperative and a company the 3PL would rather walk away from.



About the Author

image
Rosemary Coates
President of Blue Silk Consulting
Ms. Coates is the President of Blue Silk Consulting, a Global Supply Chain consulting firm and the author of: 42 Rules for Sourcing and Manufacturing in China. (an amazon.com Top Seller) and 42 Rules for Superior Field Service. Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters.

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Intermodal units, at 278,767 containers and trailers were up 6.7 percent compared to the same week last year and marks the third best week for intermodal ever recorded based on AAR’s data.

LM Group News Editor Jeff Berman recently conducted a wide-ranging interview with Bobby Harris, President and CEO of non asset-based 3PL BlueGrace Logistics about various aspects of the freight transportation market.

It’s small, but senior brass at YRC Worldwide will take it. After nearly seven years of continuing losses in excess of $2.6 billion, the parent of the nation’s second-largest LTL carrier posted a narrow net profit in the third quarter ended Sept. 30.

As was the case for the second quarter, third quarter earnings results for publicly-traded less-than-truckload (LTL) carriers are again strong. Signs of solid earnings results from carriers that have posted earnings to date include tonnage increases, gains in weight per shipment and average daily shipments, higher yield, and revenue per hundredweight.

While the holiday season is known to bring good tidings and cheer to all, it may also come with another thing that is not so pleasant: higher rate freights. That was the thesis of a commentary written by Mark Montague, industry pricing analyst and chief market-watcher for DAT, a Portland, Ore.-based subsidiary of TransCore.

Article Topics

Blogs · 3PL · Global · Supply Chain · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.