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Leveraging Behavioral Data in Negotiations

Published March 30, 2020

Written by: Christian Ries
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Christian Ries

Christian is a healthcare consultant for SHC Pacific LLC, a boutique healthcare consulting firm located in Newport Beach, California. He has spent his career in a variety of healthcare roles from coast-to-coast including risk management, legal affairs, and supply chain. He has strategically sourced over $500m in healthcare agreements and saved IDN clients $50m+ throughout his career. Similarly he has led digital transformation initatives in the supply chain, HR, finance, and sourcing spaces for large IDN clients. When not in the office, he can generally be found running amok in the National Parks and Forests of the Southwest with his family. 

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Knowing the behavioral history of a supplier prior to negotiations is essential to understand the reasons why a supplier is likely to offer optimal prices and service level agreements (SLA).

In the past, siloed and in-person negotiations often revealed insights about supplier behavior, but these insights were usually ignored because there was no empirical way for a sourcing professional to capture, share, and leverage this behavioral data cross-functionally.

Now, with the rapid digitization of procurement, a sourcing professional can use an AI sourcing enablement tool to learn what makes a supplier willing to come to the table ready and willing to sign on the dotted line.

But having access to data is not enough. A procurement professional needs to understand, process, and implement a supplier’s behavioral data to help build a relationship that empowers the supplier and brings value to her company. Learning about supplier responsiveness, supplier personas, and compliance is a great first step in understanding the value of behavioral data in negotiations.

Responsiveness

Tracking a supplier’s RFP response time can provide the procurement professional significant insights into a supplier’s likelihood to be a partner. For example, if a supplier participates in many RFPs annually across categories, tracking the supplier’s response time across your organization’s requests can help one identify into which categories the supplier feels most comfortable and competent.

Responsive time and attention to detail is the essence of responsiveness. They are indications of how a supplier will perform as a partner. Responsiveness is generally part of a larger corporate culture and will likely transcend the company from sales rep to account manager, post-award.

The data shows that the more responsive the supplier, the more likely it is that they will partner with an organization. Taken one step further, responsiveness is often correlated with suppliers who are more likely to meet savings expectations.

The data also shows that as one tracks their data over the years, one will better understand their suppliers: their bid interests, their best-matched categories of spend, and where the organization and the supplier can add value.

Personas

Tracking how a supplier meets savings expectations and submits pricing can give a procurement professional an indication of how a supplier negotiates. For example, if a supplier meets expectations with little fanfare in negotiation, one may call them “amicable.” In the alternative, if another supplier still does not meet the organization targets after 14 rounds of negotiation, one may call them “bullish.”

By tracking how suppliers meet or don’t meet expectations (including those in cross-functional notes to your team) can provide valuable insight. Perhaps a vendor is only bullish in specific categories or only with certain sourcing managers. Perhaps a new supplier is “amicable” until they are an awarded incumbent, and then they switch to “bullish’ once they are in the door.

While persona data points are far less concrete than response time, assigning criteria and parameters around submission criteria can help a procurement professional assign persona to suppliers in a request. And tracking cross-functionally cangather insights that lead to optimizing requests, selecting partners, improving performance and reducing churn.

Compliance

It is easy to set submission expectations at the outset of a negotiation. It is just as easy and important to track a supplier’s compliance with those expectations.

For instance, if one requests a digital and a hard copy and does not receive both, make a note of it. These compliance issues may be small but tracking them may open one’s eyes to some alarming trends. If a supplier fails to comply with a bid packet mandates request, it may indicate that a sales rep or organization is not detail-oriented or is not really listening to the needs of the organization. In this example, it may be time to stop inviting them to submit bids.

Having behavioral data readily available is essential for potential bid contest situations and in certain cases can prepare one for an audit.

Final Thoughts

Behavioral data in supply chain analytics is as invaluable to the procurement professional as pricing data. Now more than ever, this data is easy to track and share. It’s the responsibility of the procurement professional to know and understand behavioral data and use it to benefit all parties in the supply chain.  

“Without knowledge and understanding, one tends to become a passive spectator rather than an active participant in the great decisions of our time.” -Diane Ravitch

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