Negotiating Cooperative Supplier Relationships: A Planning Framework

An increasing number of industrial buyers are finding that the development of cooperative relationships with suppliers produces benefits such as cost reduction and access to technological developments that are difficult to achieve through traditional competitive arrangements. [1] Although the success of a cooperative relationship depends largely on how the parties develop the relationship over time,[2] negotiation of the initial agreement is critical in setting the stage for subsequent development of the exchange relationship. [3] Substantial evidence from negotiation research, however, shows that negotiating parties often have difficulties creating sustainable agreements that maximize joint gains. [4] Negotiations often are characterized by a misguided perception of the negotiation task, destructive negotiation processes, and suboptimal agreements. [5] While barriers to high quality agreements can be overcome by systematic negotiation planning and behavior, buyers accustomed to competitive arrangements may have neither the competence nor the organizational support necessary to prepare for, and to negotiate, complex partnering agreements. [6] Without proper negotiation planning, efforts to create cooperative relations can result in ambiguous and superficial agreements in which a buyer gets locked into friendly but unproductive relationships with suppliers, or finds that some suppliers use the dependence created by the agreement to act opportunistically. [7] In this article, the author attempts to complement previous research. In applying a negotiation perspective to the development of buyer-supplier relationships, the article: * Discusses critical dilemmas facing negotiators wanting to establish cooperative relationships * Outlines a framework for negotiation analysis of potential partnership relations * Discusses procedures for buyer-supplier interaction NEGOTIATION DILEMMAS Negotiation is defined as "a process of potentially opportunistic interaction by which two or more parties, with some apparent conflict, seek to do better through jointly decided action than they could otherwise. "[8] To successfully create a cooperative relationship through this process, one must be able to not only identify joint benefits (i.e., win-win situations) but also handle conflictive issues constructively, ensure that the agreement is perceived as fair by both parties,[9] and see that it sets the stage for constructive implementation. [10] The achievement of these goals depends to a large extent on how two interrelated negotiation dilemmas are handled - namely: 1. Cooperation versus conflict 2. Substance versus relationship[11] A frequent misunderstanding of cooperative relations, as compared with competitive arrangements, is that conflicts are replaced by cooperation, and that substantive problems are reduced because of good relations. Of course, values created through cooperation between the parties must be divided, and cooperative relations are only instrumental means to enhance substantial interests. It is the constructive handling of all four elements that makes up a good agreement, but this is a challenging situation that often is filled with tension. Cooperation and Conflict Traditionally, most negotiators have distinguished between competitive and cooperative orientations toward exchanges. Recently, however, the adverse and suspicious nature of competitive relations has come under attack, and the collaborative and trustworthy nature of cooperative relations has been advocated for supplier relations. Most negotiation research, however, rejects the distinction between cooperation and competition, and focuses on "enlightened self-interests"[12] as the constructive orientation toward complex negotiations. The enlightened self-interest orientation implies that the negotiator is motivated to get the best possible deal for himself, expects the other party to think likewise, and therefore tries to fulfill his own interests by also satisfying the interests of the other party. …