SUPPLIER SELECTION; APPRAISAL AND EVALUATION

Supplier Appraisal
Supplier appraisal may arise when a prospective vendor applies to be placed on the buyers approved list or in the
course of negotiation when the buyer wishes to assure him/herself that a supplier can meet requirements reliably.
Supplier appraisal can be a time consuming and costly activity. The situations in which appraisal is essential
include:
Where potential suppliers do not hold BS EN ISO 9000:2000;
Purchase of strategic high profit, high risk items;
Purchase of non-standard items;
Expenditure on capital items, including plant, machinery and computer systems;
For purpose of supplier development i.e. what needs to be done to bridge the gap between the present resources
and competencies of a supplier or potential supplier and the standard required by the purchaser;
When entering into Just-in time (JIT) arrangements;
When establishing e-procurement arrangements with long-term strategic suppliers
When negotiating outsourcing contracts;
When negotiating total quality management (TQM) and quality in respect of high profit or high risk items;
When negotiating service level agreements.
Supplier appraisal can be undertaken by a combination of the following:
Desk research using published or unpublished data already in existence e.g. companys reports, balanced
sheet, strike records etc
Field research to obtain further data of a prospective supplier by a visit to their working environment.
What should be appraised?
Suppliers appraisal is situational. What to appraise is related to the requirements of the particular purchaser. All
appraisals should however, evaluate potential suppliers from the following perspectives:
FINANCE: The supplier should be financially stable to meet the holistic buyers requirements. The checks
recommended are:
The assessed turnover of the enterprise over three years
The profitability and the relationship between gross and net profits of the enterprise over three years
The value of capital assets, return on capital assets and return on capital employed
The scale of borrowings and the ratio of debts to assets
The possibility of takeover or merger affecting ability to supply.
Whether or not the firm is tied to a small number of major customers, so that if one or more withdrew their
businesses it might cause the firm financial difficulties.
Whether or not the organization has sufficient capacity to fulfill the order.
PRODUCTION CAPACITY: This entail the limiting capability of a productive unit to produce within a stated
time period, normally expressed in terms of output units per unit of time. In appraising supplier capacity, attention
should be given to the following consideration:
The maximum productive capacity in a normal working period.
The extent to which capacity is currently over or under committed for example, a full order book may
raise doubts about the suppliers capacity to take on further work or else you have to wonder if a substantial
amount of capacity is underutilized.
How existing capacity might be expanded to meet future increased demand

The percentage of available capacity utilized by existing major customers

What percentage of capacity would be utilized if the potential supplier were awarded the business of the
purchaser this can also be assessed in terms of annual turnover, but in any case, care should be taken to
avoid making the supplier overly dependent on one or two customers.
What systems are used for capacity planning?
HUMAN RESOURCES:
This involves checking information regarding the title, qualification and experience of managerial staff, training
schemes, and encouragement of teamwork and empowerment of employees. Information should be obtained
regarding the:
Number of people employed in manufacturing and administration

Use of human resources whether economical, with everyone busy, or extravagant, with excess people
doing little or nothing.
Names, titles, qualifications and experience of managerial staff
Encouragement of team work and empowerment
Worker representation and recognized trade unions
Days lost due to industrial disputes in each of the past five years
Turnover of managerial and operative staff
Workers attitudes to the organization and concern for meeting customers requirements.

QUALITY:
The buyer should check critically to establish whether the supplier embraces some of the fundamental quality
attributes e.g. Total quality management (TQM); International organisation for standardization (ISO) etc. Appraisal
may require satisfactory answers to such questions as the following.
Has the supplier met the quality approval criteria of other organizations, such as the Ford quality Awards,
the Ministry of Defence, British Gas or others?

To what extent does the supplier know about and implement the concept of total quality management?
What procedures are in place for the inspection and testing of purchased materials?
What relevant test and inspection process does the supplier use?
What statistical controls are applied regarding quality?
Does quality control cover an evaluation of quality?
Can the supplier guarantee that the purchaser can safety eliminate the need for all incoming inspection/
(this is especially important for JIT deliveries.
PERFORMANCE:
The buyer should also check the track record of the supplier to establish the performance trend. Particularly when
appraising suppliers of non-standard products such as construction projects or the installation of computer system,
questions should be asked regarding the following;
What similar projects has the supplier already undertaken?
What current projects are in hand?
What are / were the distinctive features of such projects?
What innovations might be introduced?
What customers can the supplier cite as referees?
ENVIRONMENTAL AND ETHICAL FACTORS:
The buyer has a duty to check fully how the supplier approaches environmental and ethical issues. To this extent
therefore, policies, and procedures in line with environmental/ethical considerations should be critically checked. In
Kenya, National Environmental Management Authority (NEMA) provides guidelines on environmental policies
and, where applicable, suppliers should be expected to have an environmental policy and procedures for the

implementation of such a policy. A large number directives and regulations have also been issued relating to air,
water, chemicals, packaging and waste
Apart from those with reference the NEMA suitable questions to ask include the following: Has responsibility for environmental management been allocated to a particular person?
Are materials obtained, so far as possible, from sustainable soruces such as timber?
What is the lifecycle cost of the suppliers product?
What facilities has the supplier for waste minimization, disposal and recycling?
What energy savings, if any do the suppliers products provide?
What arrangements are in place for the control of dangerous substance and nuisance?
INFORMATION TECHNOLOGY:
The buyer should check whether the prospective suppliers embrace the information technology. Some of issues in
line with IT entail, checking whether the supplier has a website; finding out whether the suppliers procedures are
automated etc. Research indicates that, at the time of writing, more than a third of buyers currently use the Internet
to conduct transactions and such usage is likely to increase dramatically. Additionally, the Web also supports a
variety of activities, such as identifying new sources of supply, finding product information, including products,
prices and delivery as well as tracking orders and receiving technical advice and after sales service. It is useful to
ask mainly open-ended questions under this heading as the replies will indicate the extent to which the supplier is
exploiting the possibilities of e-business. Here are some typical questions that might be asked:
Does your organization have a website?
What information does the website provide?
What business activities does your organization process electronically?
In what ways does your organization
- Reduce or eliminate paper transactions
- Shorten inventory
- Provide real-time information on product availability and inventory
- Provide collaborative planning?
- Integrate its supply chain?
Checklist for supplier visits:
The following checklist indicates areas which warrant particular attention by procurement staff when making
appraisal visits to potential suppliers:
Personal attitudes: An observant visitor can sense the attitudes of the suppliers employees towards their
work and this provides an indication of the likely quality of their output and service dependability.
Adequacy and care of production equipment: This entail close observation of the equipment in a plant
Technological know-how of supervisory personnel: Conversation with supervisors will indicate their
technical knowledge and their ability to control and improve the operations of processes under their
supervision.
Means of controlling quality: Observation of the inspection methods will indicate their adequacy to ensure
the specified quality of the product.
Housekeeping: A plant which is orderly and clean in its general appearance indicates careful planning and
control by management.
Competence of technical staff: Conversation with design, research staffs indicate their knowledge of the
latest materials, tools and processes relating to their products and on anticipated developments in their
industry.
Competence of management: All the above areas are, in essence a reflection of management and therefore
indicate its quality.

Supplier Assessment Methods

There are two main approaches used in selecting suppliers:
Supplier appraisal used to select potential / new suppliers
Vendor rating used to assess already performing suppliers.
Supplier appraisal
This is the assessment of the potential suppliers so as to be used as on of the companys suppliers. Thus, the concern
is with the selection of the next suppliers. The main techniques used in supplier appraisal are:
I. Desk research:
This is where an analysis of the suppliers document is done. The documents include:
Balance sheet, profit and loss account, organization chart etc. This analysis is done by use of statistical tools and
ratio analysis. This enables the buyer to make an informed judgment on the potential of the supplier to be.
II. Field research / Capacity survey:
Effectiveness of production systems.
Quality assurance systems
Cost control systems
Appropriateness of the equipments
Attitudes and stability of management.
Competence of technical staff
Morale of workforce which indicates quality of service expected.
Employee relations in accordance of strikes, communication between managers and subordinates, past major
customers and reputation of the organization
How the company handles environmental and human rights issues.
Once the new suppliers have been selected, constant monitoring and feedback is required to either improve their
performance or eliminate the non-performing ones.
Vendor Rating
It is the assessment of already performing suppliers so as to improve their performance or replace them. The two
techniques used in vendor rating are:
Subjective supplier rating method.
Objective supplier rating method.
Subjective supplier rating method:
A purchasing officer is appointed to observe on how well or badly the suppliers are performing and then judge each
supplier. It is subjective because different individuals have different value judgments.
Advantages:
1. It is cheap to carry out as only one observer is used and there are no records kept.
2. Is a good method to eliminate obvious shortcomings.
Disadvantages
1. Not factual therefore personal liker and dislikes may be used by the observer.
2. Not accurate
3. It is susceptible to bribery thus the company may receive low quality items
4. No records are kept in case they may be needed for future reference.
Objective supplier rating method:
Marks are allotted to each of the factors that determine a good supplier each time a supplier performs. These factors
include: Right price, right time, right quality, right quantity, service given to the buyer, cost reduction effort,
management capability.
The marks are the compiled at the end of a given period and used to come up with a conclusion in respect to each
supplier.
Advantages:
1. The method is more accurate than subjective.

2. Avoids complaints / disputes as it is based on facts

3. Minimizes incidences of bribery
4. Ensures high quality goods are delivered.
5. Reference in form of records is kept in case the procurement / purchasing officer leaves office.
Disadvantages:
1. Record keeping can be expensive.
2. The method is time consuming.
Early supplier involvement (ESI)
ESI is an approach in supply management to bring the expertise and collaborative synergy of suppliers into the
design process. ESI seeks to find win win opportunities in developing alternatives and improvements to
materials, services, technology, specifications and tolerances, standards, order quantities and lead time, processes,
packaging, transportation, redesigns, assembly changes, design cycle time, and inventory reductions. Today, early
supplier involvement (ESI) is an important accepted way of life at many proactive firms and a requirement for world
class supply management.
The suppliers are carefully prequalified to ensure that they posses both the desired technology and the right
management capability. The technological benefits of early supplier involvement can be obtained, with due
consideration to the commercial aspects of the relationship i.e. mutual benefits. ESI helps in developing trust and
communication between suppliers between suppliers and the buying firm. ESI normally, but not always, results in
the selection process of a single source of supply. At most progressive companies, this selection process is the result
of intensive competition between two or three carefully prequaified potential suppliers. The company selected
becomes the single or primary source of supply for the life of the item using the material.
ESI is critical in reducing the cost of production, improving quality and preventing costly delays.
Advantages of Early Supplier Involvement
The advantages of ESI in product development may be briefly summarized as:
a) Improved product specification
b) Enhanced quality
c)

Lower development costs

d) Access to new technologies a head of competitors

e)

Joint problem-solving

f)

Interchanging of knowledge and information

g) Improved manufacturability of products

h) Reduced concept-to-customer development.
The disadvantages and problems of early supplier involvement
The disadvantages and problems of ESI have been summarized as follows:
a) There is fear of leakage of vital information
b) Loss of control or ownership.
c)

There is longer development lead-time

d) There are conflicts due to different aims and objectives

e)

Collaborators could end up being competitors.

Factors to consider or point out when developing Early supplier involvement

Degree of responsibility for design

Specific responsibilities on the on the requirement selling process

When to involve the supplier in the process

Intercompany communication

Intellectual property agreement

Supplier membership on the project team and alignment of objectives with regards to outcome.

Evaluating supplier performance

There are various reasons for evaluation of purchasing performance.
Evaluation can significantly improve supplies performance. Properly done, supplier performance management can
provide answers to questions such as the following:
- Who are the highest quality suppliers?
- How can relationships with the best suppliers be enhanced?
- How can suppliers performance be incorporated into total cost analysis?
- How can buyers ensure that suppliers live up to what they promised?
- How can feedback be shared based on experience with a supplier?
- How can buyers ensure those suppliers problems be tracked and fixed?
Evaluation assists decision making regarding when a supplier is retained or removed from an approved
list.

Evaluation assists in deciding with which suppliers a specific order should be placed; Evaluation provides
suppliers with an incentive for continuous improvement and prevents performance slippage.
Evaluation can assist in decisions regarding how to distribute the spend for an item among several suppliers
to better manage risk.
THE TEN CS OF EFFECTIVE SUPPLIER EVALUATION
Many of the aspects of supplier appraisal are neatly summarized by carter as the ten cs of supplier evaluating
Competency of the supplier to undertake the task required
Capacity of the supplier to meet the purchasers total needs
Commitment to the supplier to the customer in the term of quality, cost driving and service
Control system in relation to inventory,cost,budgets,people and information
Cash resources and financial stability ensuring that the selected supplier is financially sound and is able
to continue in business into the foreseeable future
Cost commensurate with quality and services
Consistency the ability of the supplier to deliver consistently and, where possible, improve levels of
quality and service.
Culture
Clean-i.e. environment
Communication the role of information technology

SUPPLIER RELATIONSHIP MANAGEMENT

Building long-term relationships with suppliers:
The longer a buyer stays with a supplier, the more they are likely to treat it as a preferred supplier. The trend
towards buyers seeking to reduce their supplier base and the move towards single sourcing is becoming important
for long term relationships. The benefits of such an approach include:
Improved quality
Innovation sharing
Reduced costs
Integrated scheduling of production and deliveries.
Building relationship with suppliers is becoming an explicit part of the procurement strategy for both small and big
companies. Challenges like globalization, rapid product development, advances in production technologies, cost
reduction, bubbling issues like trimming supply base, just-in-time, mass customization, lean manufacturing, core
competence-based on make or buy procurement strategies have led procurement managers to think radically in a
different way to deal with future procurement strategies. The result has been to improve the role of buyer-supplier
relationship in competitive equation. Establishing long-term relationships with capable suppliers and working
closely with them over time to achieve high levels of quality and productivity involves communicating intentions
and expectations clearly, defining measures of success, obtaining regular feedback, and implementing corrective
action plans to improve performance.
The distinct success factors for buyer-supplier relationship encompass: attitude, commitments, trust,
communication, coordination, motivation, conflict management, participation, culture change and most
importantly continuous improvement.
Procurement relationships
Procurement relationship can be expressed in the following ways:
(1) Partnership sourcing
(2) Reciprocal trading
(3) Counter trade
(4) Intra company trading
(5) Sub-contracting

Partnership sourcing: This is a commitment to both customers and suppliers, regardless of size to a long-term
relationship based on clear mutually agreed objectives to strive for world class capability. Partnership sourcing
seeks to make improvements in areas such as: design, quality, delivery and completion times, production costs,
operating costs, stocks levels cash flow etc.
Reciprocal trading: This is a mutual exchange of buyers and suppliers products of advantages/privileges in
commercial relations. It is selling through the order book when a policy is adopted of giving preferences to
those suppliers who are also customers of the buying company.
Counter trade: This is a form of international reciprocal trade in which an order is placed by a purchaser to a
supplier in another country on condition that goods of equal proportions will be sold in the opposite directions.
The types of counter trade entail: Barter or Swap, counter purchase, Buy back, Switch trade and offset trade.
Intra-company trade: This applies to large enterprise and conglomerates where the possibility of buying
certain materials from each group is made possible. The policy guideline may direct buyers to purchase
specified items exclusively from group members regardless of the price, obtain quotations from group members
which are evaluated against those of external suppliers with the order being placed with the most competitive
source whether internal or external.

Sub-contracting: Sub-contracting entail means of augmenting limited resources and skills while enabling the
contractor to concentrate on their main area of expertise. Sub-contracting relieves the main contractor of some
duties and therefore being in a position to concentrate on supervision. Also sub-contracting reduces cost on the
part of main contractor as well as attracting highly qualified and experienced experts to do the job. To this
extent therefore both the main contractor and the sub-contractor should embrace a good relationship to ensure
smooth flow of the underlined activities.

Guidelines for successful supplier relationship management

Boeings Dreamliner lithium battery fiasco caused worldwide groundings of aircraft whilst the company threw all
resources at solving the problem, getting planes flying again, and rebuilding trust in the brand. This is adramatic
examples of a failure to control supply chain quality, and of inadequate supplier management. Despite an increasing
number of organisations embracing supplier relationship management (SRM) in recent years, most implement
programs with insufficient skills and capabilities at their disposal, and a lack of understanding of the capacity or
bandwidth required to assure sustained success.
A number of general principles (axioms, if you like) have emerged that procurement leaders find useful when it
comes to understanding, promoting and implementing SRM in their organisations. They represent a reality-check on
what may be possible in the specific business, supply market, and key relationships the practitioner is required to
manage.
Here are some of those principles, starting with a simple definition:
1.
2.

SRM is the systematic creation and capture of post-contract value from key business relationships;
It requires recognition that relationships are not an end in themselves. Successful relationships are an
outcome and, for the buyer, that outcome can be measured in value terms, hence the recent vogue of talking
about supplier value management;
3. It is mostly about collaboration with strategic suppliers, but can still be adversarial. The business must be
able to flex its application of SRM appropriate to the criticality of the specific supplier relationship;
4. SRM needs to be completely integrated with strategic sourcing / category management processes. Its not
something you design after the contract is signed;
5. It requires a detailed analysis of the specific supplier relationship, before the strategy can be determined;
one size certainly does not fit all;
6. It is about aligning the whole enterprise around the task of managing a specific supplier based on a clearly
documented relationship strategy;
7. SRM is not a soft option in engaging with suppliers. Its demanding and process-focused. Its a lot more
about how the organization systematically plans, than it is about an interpersonal skill set of the
procurement person or relationship manager;
8. SRM does not necessarily mean win-win; although contracts must be structured to ensure each party
enthusiastically implements the agreement;
9. It is as much about driving-up day-to-day operational performance as innovation and joint value
creation. Many leaders get excited about senior executive contact and alliance potential. The most
successful organizations recognize that the basics are the foundation of everything that can be achieved in
the relationship and so focus on the essentials;
10. To get started in an SRM program, it always best to successfully implement a small number of SRM
pilot projects, rather than go for the big bang. If you choose the latter youll quickly find your resources
spread too thinly, and leaders and stakeholders will become frustrated by your lack of business impact.

Organisations that deploy SRM successfully report additional value benefits of 2% of total spend, right through to
40+% from specific key relationships. Organisations continue to look to design and implement SRM but often
make the mistake of assuming good governance (through supplier meetings) is enough to assure success. As you can
see from whats above, its a lot more than that. Nevertheless, that potential success is worth shooting for. As can be
seen from those recent high-profile examples, leaving supplier and supply chain performance to chance is no longer
an option.

LESSON 4: PROCUREMENT NEGOTIATIONS

Lesson outcome
At the end of the lesson, the learners should
1. Show an understanding of different types of negotiation approaches and their applicability
2. Show an understanding of the different stages of any negotiation
3. Clearly show the importance of negotiation in procurement mangement
Definition and objective of negotiation
Negotiation refers to the process of conferring, discussing or bargaining to reach an agreement in business
transactions. This makes negotiation a process of planning, reviewing and analyzing used by both buyers and sellers
to reach acceptable agreement or compromise. Thus, in purchasing negotiation must be used only as decision
making process for it to achieve its full value. In successful negotiations, both sides win something i.e. it is a win
win negotiation approach.

Objectives of negotiation for procurement.

To obtain the quality specified.
To obtain a fair and reasonable price.
To get the supplier to perform the contract on time. The delivery date schedule for quantity and quality
specified should be realistic. It is important that buyers negotiate delivery schedules which suppliers can
realistically meet without endangering the other requirements of the purchase.
To exert control over the manner in which the contract is performed deficiencies in supplier performance
can seriously affect and in some cases completely disrupt the operations of the buyers firm. Hence, need for
buyers to negotiate for controls which will assure compliance with the quality, quantity, delivery and
service terms of the contract. Control has been found to be effective in areas such as: Man hours of effort;
levels of scientific talent; special test equipment requirements; the amounts and types of work to be
subcontracted; progress reports.
To persuade the supplier to give maximum cooperation to the buyers company reward those suppliers
who perform well with future orders. Good suppliers also expect courtesy, pleasant working relations,
timely payment and cooperation from their customers.
To develop a sound and continuing relationship with competent suppliers: Buyers must maintain a proper
balance between their concern for a suppliers immediate interest and long-run performance.
To create a long-term partnership with a highly qualified supplier.
Styles and approaches of negotiation
These can be classified as adversarial and partnership
Adversarial negotiation: Also referred to as disruptive or win lose negotiation approach.
Parties have competing goals
Involves use of threats
In case of deadlock, negotiation is terminated

 The approach is rigid

The attitude is that of we must win, they must lose.
Partnership negotiation: Also referred to as win- win negotiation.
Common goals emphasized upon.
Negotiation is friendly and based on openness
In case of a deadlock, negotiation results to further problem solving
The approach is flexible
The attitude is we both must win.
Adversarial negotiation.
The emphasis is on competing to attain goals at
the adversarys expense
Strategy is based on secrecy, retention of
information and low level of trust in the
perceived adversary.
The desired outcomes of the negotiation are
often misrepresented so that the adversary does
not know what the opponent really requires the
outcome of the negotiation to be. There is little
concern for a empathy with the other party.
Strategies are unpredictable, based on various
negotiating ploys designed ploys designed to
outmaneuver or throw the other
Parties use threats, bluffs and ultimatums with
the aim of keeping the adversary on the
defensive.
There is an inflexible adherence to a fixed
position that may be defended by both rational
and irrational arguments. Essentially, the
approach is destructive.

The unhealthy extreme of an adverbial

approach is reached when it is assumed that
movement towards ones own goal is facilitated
by blocking measures that prevent the other
party from attaining the goal.
The key attitude is that of we win, you lose

If an impasse occurs, the negotiation may be

broken off

Collaborative negotiation
The emphasis is on ascertaining goals held in
common with the other party
Strategy is based on openness, sharing of
information and high level of trust in the
perceived partner.
The desired outcomes of the negotiation are
made known so that there are no hidden
agendas and issues are clearly understood. Each
party is concerned for and has empathy with the
other.
Strategies are predictable. While flexible, such
strategies are aimed at reaching an agreement
acceptable to the other party.
Parties refrain from threats and so, which are
seen as counterproductive to the rational
solution of perceived problems.
The approach is essentially friendly and nonaggressive we are in this together. This
involves downplaying hostility and giving
credit to constructive contributions made by
either party to the negotiations.
The healthy extreme of the partnership
approach is reached when it is assumed that
whatever is good for the other party to the
negotiations.

The key attitude is how can the respective goals

of each party be achieved so that both win?

If an attitude occurs, this is regarded as a

further problem to be solved, possibly by the
intention of higher management or an internal
or external mediator or arbitral.

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Negotiation Cycle
This shows the cyclical nature of events in the process of negotiation i.e.
Get the facts
Determine the bargaining strengths
Set objectives
Plan strategies / Tactics
Negotiate
Review performance.
Determining bargaining strengths:
Buyer bargaining strength is high when;
When suppliers are many
When there are alternative solutions, suppliers or substitutes i.e. BATNA (Best alternative to a negotiated
agreement)
Cash payment
When you are prepared or have done good research.
When the need is not urgent.
Supplier bargaining strength is high when
In the case of a monopolistic situations
When the need is urgent
When the quantity needed is large
When the product to be supplied is unique.
Negotiation strategies, Techniques and ploys
Strategies / Tactics
The order in which issues will be negotiated
Whether to speak first or allow the opponent to open the negotiation
What concessions to make should the need arise?
The timing of the concession
Issues to be linked e.g. price and quality
What will be the opponents reaction to each tactic?
What tactics the opponent is likely to adopt and how these can be countered.
Techniques
Use of questioning techniques
Using diversions to ease tensions e.g. going for a walk, tea break or making a joke.
Using positive statements.
Being a good listener and watching body language
Having adequate supplier background information.
Ploys / Arm-twisting / lies
Ploys are used to gain advantage over the other party. However, the other party can use counter ploys. Ploys can also
ruin long term relationships and should not be relied on in negotiations e.g. offering two choices of which one is so
bad that you have to choose the second; Setting unrealistic deadline to pressurize the other party in making a quick
decision.

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Phases / Stages of negotiation

Preparation stage: Activities performed during the preparation stage include:
Gathering facts about suppliers
Setting objectives
Determining bargaining strengths
Planning strategies
Preparing for alternative courses of action
Choosing the negotiating team
Choosing the venue
Introduction Stage
Involves setting agenda, rules and procedures and create a conducive environment.
Discussion stage / Debating stage
Avoid interruptions
Avoid arguments
Avoid destructive debates
Regularly summarize issues to avoid later confusion
Watch and interpret body language.
Bargaining Stage
It involves setting terms on which to settle e.g. price reduction by so much percent will result in order
increase by so much percent.
Ploys can appropriately be used at this stage.
Agreement stage / Conclusion of negotiations
It is important to record full details of the negotiation .The minutes of the meeting can be used to serve this
purpose.
Post Negotiation Stage:
It involves making a draft document which should be sent to the other party for approval.
Ensure that there is commitment of all relevant employees in order to make the agreement work
Prepare official contract based on draft agreement
Evaluate the performance.

Elements of an effective negotiation

Substance issues are satisfactorily resolved
Working relationship are preserved or even enhanced
The negotiation produces a wise agreement i.e. one that is satisfactory to both sides.
The negotiation is efficient i.e. it is no more time consuming or costly than necessary
The negotiation is harmonious i.e. it fosters rather than inhibit good interpersonal relationships.

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