Don’t Miss Out on These Three Ridiculously Simple Negotiating Tricks You Can Use Today

Card Trick

We negotiate agreements all the time, but many people like you still don’t feel comfortable making deals. While there are lots great books with detailed advice, I wouldn’t want you to miss out on these three tricks that behavioral scientists suggests could tip the scale in your favor. Best of all, this paragraph contains all three tricks! Take 1 to 2 minutes and find out exactly what they are.

1. “Many people like you…”

Humans are social animals, and we’re constantly looking to others for clues on how to act. Knowing what the majority of people do creates powerful motivation for people to act similarly. For example, if a waitress at a restaurant told you, “We have two specials today, but many people like you are loving the filet mignon,” you would likely give the fillet mignon much more consideration than the other options.

In a business setting, this phrase can have significant impact with suppliers. For example, when negotiating payment terms, you can use a phrase such as, “Most of our suppliers like you offer us credit terms of Net 60.” This wording can give your supplier a strong inclination to offer you the same.

One caution many people like you should consider is not overusing the phrase (see how it gets old rather quickly?). Also, be sure that you’re honest about what you’re recommending. If most people don’t really do what you’re suggesting, then consider another approach.

2. “Take 1 to 2 minutes…”

A recent Columbia Business School study suggest that you should always quote a range with your real value on bottom. Doing so will increase your chances of getting the quoted price you want.

For example, let’s say you ask me how much I’ll charge for a small consulting project. If I was hoping to get $100, then quoting you a range of $100 to $120 not only increases the chances that you’ll be happy to agree at $100, but it also opens up the possibility that we settle at $110. The chart below details the bolstering strategy.

Ames and Mason range offers graphic

If you’re on the buying end, flip the strategy around. If you want to buy something for $20, offer 15-20 bucks, and the seller will likely be more willing to settle at $20.

The best part about this technique is that it can be used right away with very little risk. The next time you quote a price, include a range with a higher number and you’re more likely to get what you quote.

Read more about the details of the study from Columbia’s article: When It Comes to an Opening Number, Sometimes the Best Bargaining Move Is to Offer Two. The above chart is from the article as well.

3. “I wouldn’t want you to miss out…”

Another quirk about human behavior is loss aversion. We are disproportionately worried about losing  opportunities. Mentioning this aversion can trigger people to change their approach and be more willing to agree to a deal.

For example, negotiating better payment terms with a supplier might sound like this, “we have a lot of great growth opportunities next year, and I wouldn’t want you to miss out on extra orders from us because of tight credit terms.” Considering the possibility of missing out on future opportunities may be the key to getting the concession you need.

This technique, and the “many people like you” phrase, are both explained further in an excellent Freakonomics podcast, The Maddest Men of All.

Good luck in your future negotiations, and let me know if these tricks worked for you.

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    21 Vendor Metrics Your Supplier Scorecard Might be Missing


    Giving your vendors feedback through a supplier scorecard is one of the best ways to improve their performance. When you take factors beyond price into consideration, your total cost of ownership decreases, your customers are happier, and you improve relationships along your entire supply chain.

    But is your scorecard missing key metrics?

    The goal of a supplier scorecard is to measure things that are important to you and your customer. By measuring and keeping score, you can encourage your suppliers to improve.

    If you don’t have a supplier scorecard system yet, then check out my guide on Building an Awesome Vendor Scorecard Program in 4 Easy Steps. It includes a free Excel template that you can modify to match exactly what metrics you want to measure.

    While some of these metrics might not apply to your business model, there’s definitely a few to add if they measure something important to you and your customers.

    1. Communication

    Whether it’s email response time, conversation clarity, or even language skills, bad communication can be a huge drain on a relationship. Ask everyone who interacts with the supplier to rank communication on a ten-point scale and average the scores. Give specific feedback to your supplier on which aspect of communication would most improve the score: Do their emails need to provide more details? Should they look into hiring some translation help? Could they email less often?

    1. Lead Times

    Keep a running average of the lead times from order to receipt for each supplier. Compare against other suppliers or a standard you’re working to reach. Be sure not to penalize or reward suppliers based on your choice of shipping method. Overall lead times will of course go down if you start using express shipping. However, if the supplier chooses the shipping method, then including it might be a good idea.

    1. Payment Terms

    How long your supplier gives you interest-free loans can be very important, especially when cash is tight. Letting suppliers know what the ideal would be, or the most generous terms you have from another supplier could encourage them to upgrade your credit.

    1. Missed Shipments

    Dropping the ball on an order or stocking out can have big consequences to you and your customers. Measuring rare but high-impact failures helps both you and your vendor work on ways to avoid future problems.

    1. Financial Health

    Walmart periodically checks in on the Dun & Bradstreet credit scores of its suppliers. A supplier in poor financial health could disrupt your supply chain by entering bankruptcy. Measuring this can sometimes be tricky – but it may justify the extra effort.

    1. Number of Other Customers

    Similar to financial health, a diversified customer based is a sign of supplier strength. Walmart hopes its suppliers have other customers besides Walmart. In fact, many big-box retailers are uncomfortable being more than 30% of a supplier’s revenue base. On the flip side, you may not want some suppliers serving other customers.

    1. Ease of Doing Business

    Similar to communication, some suppliers are just easier to deal with. Being difficult can take up your team’s precious time, and those suppliers could benefit from knowing that they are a hassle. Of course, you’ll want to be courteous and professional with your feedback, but being open and honest with this metric can go a long way to solving problems between you.

    1. Audit Standards

    Many large companies such as Disney and Target have audits that every party in the supply chain must pass. Even if you don’t work with these companies, holding your suppliers to these standards can be a good idea. It usually involves bans on child or forced labor, a maximum of 60-hour workweeks, and basic safety standards. Putting this metric on your scorecard can show your vendors how important those standards are to you.

    1. Cost Reduction Suggestions

    The best vendors I’ve worked with have come to me with ideas on how to reduce costs. For example, if we tweaked a part slightly, then the supplier could offer me a lower price. I want to encourage this behavior, so my suppliers get a scorecard bonus when they make a plausible suggestion.
    Suggestion Box

    1. Product Suggestions

    I constantly worked with my suppliers to come up with great new products my customers wanted. Most of them pushed products at me, but only a handful of vendors presented good ideas. The difference was that those vendors spent time researching end users and gathered insights they could pass along to me. In your scorecard, you can rate the quality of product ideas (can you take what they offer and sell it to your customer right away), or the quantity ideas if they’re shy about presenting options to you.

    1. Relative Price

    Price likely factors heavily into your decision, but do your vendors know where they stand compared to others. While you may not want to tell any of your vendors, “you’re our cheapest option,” because they might raise prices, you may want everyone else knowing they’re more expensive. A qualitative gauge similar to, “you are more expensive than average on most products,” can help more expensive suppliers know where they stand and encourage them to quote lower prices in the future.

    1. Specific Quality Metrics

    Most vendor scorecards have “Quality” as a category, but do you have specific subcategories? What exactly are you looking for? Here are some possible options:

    • Color
    • Size
    • Error-free
    • Performance
    • Runtime
    • Neatness

    Identifying exactly what your customer is considering as she evaluates the product’s quality will help you decide exactly what specific quality metrics to include.

    1. Capacity

    When demand is high, does your supplier have the capacity to fill your orders? Letting vendors know where they stand in their ability to fulfill your peak ordering could encourage them to make more investment and increase capacity.

    1. Minimum Order Quantities (MOQs)

    On the other side, do vendors make you order more than you really need. If so, let them know. Most of my vendors wouldn’t budge on letting me order less than 2,000 units until I made the ‘A’ score under 500.

    1. Signed and Following Manufacturing Agreement

    This is usually a yes-no metric, but it rewards them for abiding by the terms of our agreement. Without including this on the scorecard, some vendors forget you ever signed anything – especially after staff turnover.

    1. Transportation Time and Cost

    A freight forwarder really impressed me when they set up a meeting to review a scorecard they built for me – which graded them. It showed the average time it took them to deliver containers and other data points 0—0-[telling me how they were doing. Most interesting was that it showed they weren’t perfect – but that they were trying. Consider tracking similar metrics with logistics providers.

    1. In-stock Percentage

    This one may be more unusual, but it’s the key metric of retailers. Essentially, the supplier is responsible for how often its products are in stock for its customer. For me as a supplier to Walmart, it measured how often my products were on shelves. If I saw it was below their target, then it was my responsibility to talk with them and come up with a solution. If your supplier has a similar responsibility to keep you in stock, or they provide products on consignment, then consider letting them know how they’re doing and ask them to step in when it’s below standard.

    1. Your Sell-through, Sales, and Margin on Their Product

    Similar to above, if your suppliers have a stake in your sales, then let them know how sales are doing. Be sure not to share anything confidential that may help them go straight to your customer if that’s a possibility.

    1. Inventory Levels

    Letting your suppliers know how much of their product you have sitting in your warehouse can help them know when to suggest further orders or delay orders to keep you inventory at target levels.

    1. Reliability of Service or Uptime

    If you deal with service providers, especially web-based, then uptime can be a key component to measure and discuss.

    1. After Sales Support and Warranties

    When your suppliers ship your order, is that the end of their responsibility? If not, how well do they handle after-sales support? Are they easy to work with and accept returns no questions asked? Or, are they so difficult that you don’t even bring the issues up?

    What other metrics do you measure your vendors on? Leave a comment below, and please be sure to check my full guide on how to Build an Awesome Vendor Scorecard Program in 4 Easy Steps. Finally, here’s a quote that always gets me excited about doing more with metrics:

    “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.”

    -Thomas S. Monson

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      When Semi- is Better than Fully Automatic

      semi-auto
      Christopher Hatcher published a great article over at 21st Century Supply Chain about when semi-automatic processes are better than automatic ones. As an example, he talks about the exciting day in army basic training when he switched his gun from semi- to fully automatic. His observation is important: accuracy often goes down dramatically. He says,

      “I can’t remember if I actually hit any targets that night, but it was so cool to try the automatic setting.”

      Many companies go through a similar exciting phase – especially young companies that are learning how to expand their operations. Instead of taking time and really thinking out each move, we often want to find an automatic process that will “just make everything work and not bother me anymore.” When making investment decisions, it’s tempting to buy the Ferrari solution with all the options when the less glamourous bicycle product might actually work better.

      In addition to spending too much on the automatic solution, we often create additional problems or miss valuable opportunities by letting processes run on autopilot. Many opportunities for improvement present themselves through deep understanding of how processes work. That understanding can only happen when we participate in the process.

      What processes in your business would benefit from switching to semi-auto for a trial period? Which might benefit from a permanent semi-auto setting? Could less automation make some of your processes more efficient in the long-run?

      For example, I often learn more from updating important metrics by hand than metrics that update automatically. That extra attention frequently brings me important insights.

      Hatcher’s article includes these wise words:

      “Running most operations in automatic mode is likely a wise choice, but it’s important to understand which parts of the process can trigger the responsible party to intervene when necessary. Automatic sometimes just scatters lots of bullets with a great deal of sound and fury, but semi-automatic usually hits the target every time.”

      Check out the full article here: Will that be automatic or semi-automatic to manage your supply chain?

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        5 Questions on How Startups Should Begin Improving Their Supply Chains

        Improving Your Supply Chain
        Hundreds of businesses are facing the exact same problems as you right now. Many are figuring out how to take their supply chain to the next level. What are some ways other companies have tackled what you’re up against?

        In this latest podcast, I address five questions that have come up repeatedly in my conversations with small businesses:

        1. What are some ways to reduce costs and improve performance without sacrificing quality?
        2. How can a small business use technology to improve its efficiency?
        3. How can small business owners get employees and others to buy into managing their supply chain better?
        4. How can a small business oversee and boost the performance of their supply chain partners?
        5. What are some of my best suggestions for making the management of a supply chain more efficient?

        Download or listen to the podcast from the link above, or check out the full podcast transcript. Also, be sure to subscribe to the podcast through iTunes or your other podcast app.

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          The Most Popular Supply Chain Cowboy Articles of 2014

          We’ve seen significant growth this year – online traffic and subscribers have more than tripled from 2013. It’s great to know there’s so many people working together to tame the wild west of supply chain management.

          Below is a list of our five most popular articles from the past year:

          Number 5 – How Skullcandy Rocked S&OP

          How Skullcandy Rocked S&OPFor Supply Chain Cowboy’s first podcast, I had a great interview with Mark Kosiba, former VP of Operations at Skullcandy. He shared a ton of great advice on how small companies can leverage their nimbleness to grow and become world-class operations in competitive fields. If you haven’t yet listened to what Mark had to share, be sure to download it now so you can listen to it during your next commute.

          Check it out here: How Skullcandy Rocked S&OP

          Number 4 – Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

          Mark DwightWant an example of what supply chain excellence and lean production really look like at a San Francisco bag company? Then be sure to check out this Q&A interview with the CEO of Ricksaw Bagworks. The article received a lot of positive social media attention, especially from people passionate about US-based manufacturing and small business entrepreneurs.

          Check it out here: Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

          Number 3 – One Easy Excel Formula to Track Shipments

          Ship Track Excel FromulaIf anyone in your organization tracks packages, then they’ll definitely want to take a look at this article. It reviews a free excel add-in that lets you track shipments from most major carriers with a single formula. Even if you’ve shied away from tracking your shipments in the past because of how much work it can be, the article shows how that might now be possible.

          Check it out here: One Easy Excel Formula to Track Shipments

          Number 2 – Tips for the APICS CSCP Exam

          Tips for the APICS CSCP ExamSupply Chain Certifications are growing in popularity to not only help build an educational base, but distinguish job seekers looking to advance their career. This article details what I learned while preparing for the APICS CSCP exam, including useful advice for how to tackle the test. The first section about whether the exam is even worth pursuing is a great read for supply chain managers wanting to develop their team’s skills.

          Check it out here: Tips for the APICS CSCP Exam

          Number 1, the Most Popular Article in 2014 – Build an Awesome Vendor Scorecard Program in 4 Easy Steps

          Vendor Scorecard ExampleThis vendor scorecard how-to article won by a wide margin, attracting one in every four visitors during 2014. As supplier relationships become more important to a firm’s success, scorecards provide a simple and effective method of managing those connections. The downloadable template, included in the article, is a great place to start in building your vendor metric program. If you’re looking for the best bang for your buck in improving your supply chain, be sure to check this article out now.

          Check it out here: Build an Awesome Vendor Scorecard Program in 4 Easy Steps

          What’s Coming in 2015?

          Here’s a sneak peak to a few articles and podcasts coming in the next couple months.

          • The First Steps in Improving Small Business Operations
          • Fighting Fires – a How-To Guide
          • More Business and Lean Quotes
          • Bringing Lean into Your Organization

          What else would you like to see as topics for articles? I’ve had some great conversations with readers this past year, and I’d love to hear from you too. What topics are you interested in – and what challenges are you up against? Shoot me an email, or post in a comment below.

          As always, thanks for reading, and have a great holiday season and a happy new year! Grab your cowboy hat and join me in riding your forklift into the sunset of 2014.

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