Written on 10:14 AM by Shaun Hutchings
CASE STUDY: Negotiation Analysis: An Introduction by Michael Wheeler
In your own words, what is BATNA?
BATNA is an acronym for Better Alternative To a Negotiated Agreement. In my own term that means the choice that an individual has to make during a negotiation to either accept the terms of the agreement or to ‘walk away’ or in other words pursue a different course. You can also call it plan B, your back up plan, or what you can do if things go sour. Sometimes your BATNA can be really good but you’re trying to get the best out of your current negotiation and sometimes your BATNA can be really bad and you’re hoping negotiations will go well so you don’t have to resort back to your BATNA.
In your own words, what is ZOPA?
ZOPA stands for the Zone of Possible Agreement. In my own words that means that in regards to money negotiations there is a range whereas if the contract is negotiated within that range then they will walk away with a benefit. Anything higher or lower than that then the contract is better off null and void. Usually the lower number is the lowest number the supplier or I should said the seller is willing to set the contract at without walking away. On the other end the higher number is the highest the buyer is willing to pay before they are willing to walk away. In the ZOPA range there is no correct answer but usually the contract falls within that range and both parties walk away with some benefit. Usually when the ZOPA does not exist (meaning the lower number is higher than the higher number) is when both parties are not willing to budge and they both walk away from the contract and it is never finalized.
How will you become a better negotiator after reading this article?
After reading this article I am aware of several different aspects of a negotiation and the more you understand about the negotiation process the better negotiator you can become. Some of the aspects covered in the document that where important to understand was:
1. BATNAs and ZOPA and other terminology and acronyms of negotiation
2. Parties and what different parties are within a negotiation
3. Interests or fundamental needs of both parties
4. Value creation within a negotiation and who will likely get the value
5. Barriers within a negotiation that may prevent an agreement or conclusion and how to overcome such situations
6. Power within a negotiation and the influence that different parties control during the process
7. Ethics of a negotiation and what is the right thing that should be done.
All these things are vital in a negotiation and in this article or case study it describes all of these core components of a negotiation. With that knowledge you can better understand a negotiation and so you can be on top of the negotiation process and not be taken advantage of or leaving with benefits and understandings.
©2010, Shaun Hutchings, All Rights Reserved.
Posted in
Business,
Business Management,
BYUI,
Emphasis,
Global Sourcing,
Negotiations,
Supply Chain Management
|
Written on 9:02 AM by Shaun Hutchings
How can you PROACTIVELY prevent lead times from stretching in a situation like the one experienced in the SC Planning Game? This question should require much more time thinking and pondering than it does writing. Be sure to include in your response a discussion of WHY you your solution(s) would actually prevent lead time stretches in a real-life scenario like this.
I think that one of the best ways to insure that lead times do not stretch to an unhealthy amount for company is to work out a deal with the supplier before something like this happens. When I say work out a deal it could be in many forms from supplier management with report cards and a grading system to make sure the supplier is keeping it end of the bargain. Also things such as review meetings especially with executives to make sure they are both on the same page. And other resources we learned in class how to manage and work with a supplier. One of the biggest things I feel that will prevent this elasticity in lead times is within the contract that is drawn up with the supplier in the very beginning. Contracts legally bind a supplier and your company to keep their end of the bargain. With this legal bind this causes extra motivation to fulfill and complete their portion of the contract.
A good contract will contain the following:
· Agreed lead times for the delivery of specific orders
· Supplier bearing the cost of late/delayed shipments
· Supplier bearing the cost of goods damaged en route
· Advance notice of product shortages
· Advance notice of discontinued items
· Advance notice of product upgrades
· Advance notice of price changes
In a contract the biggest thing is to guarantee delivery time. Sometimes suppliers will make up unrealistic promises with their lead time to get your business, others may be hesitant and not want to close the deal with you because of the fear of not being able to fulfill the quoted delivery times. But I feel it may be important to pay a little extra to ensure that the lead times do not stretch because in the long run it may save thousands, even millions of dollars.
The reason why this would protect the system from lead time elasticity is because in a contract you can state that a supplier must be able to deliver their product within a certain period. You can be reasonable so they would be more likely to work with you but at the same time you need to calculate when the lead times start to be detrimental to the company. And when the supplier promises (in writing in the contract) to complete orders within that time they are more likely to push your orders through. Especially if you have something in the contract (like stated above) that the supplier would bear the cost of late/delayed shipment or products. This means if the lead time stretches above the contracted time allotment and demand plummets and during that time, the supplier would eat that cost of goods because of the late delivery times. This will protect you from having too much inventory like in the supply chain game. That entire inventory would then be the suppliers issue rather than yours. And suppliers do not want to end up with a ton of extra inventory or a ton of extra cost for longer lead times so they will do everything in their power to complete those lead times. This may fix the problem in the long run (meaning having too much inventory at the end) but this may not fix the problem that if demand is increasing and your supplier can not keep up with the demand then you just loose demand. You may place something in the contract too in regards to this issue but you have to choose your battles. You may not be able to win everything when you’re dealing with contract negotiations. So figure out what is more important to you and stick to your guns saying that you will not budge on this for lead time guarantee.
©2010, Shaun Hutchings, All Rights Reserved.
Posted in
Business,
Business Management,
BYUI,
Emphasis,
Inventory Management,
Risk and Flexibility Management,
Supply Chain Management
|
Written on 9:00 AM by Shaun Hutchings
What is the root cause problem between Freqon and NorduAlu? Please be specific and thoughtful.
The root cause of the problem between Freqon and NorduAlu was the supplier relationship deteriorated between the two. When they first started their relationship they had to develop a strong relationship to develop working products together. They had joint projects running where both companies worked together in Kaizen projects which would benefit both companies and find ways to cut cost. They had an open channel where the flow of information flowed freely and openly so that both companies could benefit from this. The engineers work with the engineers at the other company to share ideas and problem solve together. They had meetings constantly where they reviewed what was good and what needed improvement, but it was a very relaxed atmosphere where both companies felt comfortable with each other. Freqon was aiding NorduAlu in developing new machinery and technical capabilities to improve their manufacturing. Freqon was able to supervise NorduAlu without hostility but they where there monitoring and helping them to make sure they were achieving. And overall they had such a good relationship that they knew how each other worked and where they stood with each other, they had great communication. When one aspect of this equation failed for faulted by whatever reason another one was affected, and then another and another until the entire structure caved in on itself. The main thing was Freqon working with NorduAlu. Freqon did a couple mistakes where they found a new supplier without consulting NorduAlu, or developing new products without any Kaizen efforts with them as well. This kind of started the spark or the wedge between the two. If Freqon worked with NorduAlu, like it was proven in the past and worked, they could have developed new working products with NorduAlu and consulted them about cost reduction. But Freqon decided to pursue other avenues which caused NorduAlu to pursue other avenues until they both got to a point where they did not want to fix the relationship they had because both had other options.
If you were in charge of managing NorduAlu for Freqon, and discontinuing business with NorduAlu is not a short-term viable option, what supplier management tools would you utilize to manage NorduAlu and why? Think back on the tools we've discussed in class.
I would try and start back at square one. Yes the relationship may be damaged and it may take some time to repair but it’s never too late to start. We could use some of the same tactics that worked in the past. Such as join Kaizen projects and collaboration between the companies again to develop a new product that would benefit both companies. Here is a list of things I would try and accomplish to repair the relationship and fix the issue.
· Joint Kaizen project of the FOQ 300 or 350 that included aluminum that NorduAlu could product and provide.
· We could use a SCAR (supplier corrective action request) in the aspect of correcting the relationship between the two.
· Make a supplier report card to show what is important to Freqon so it may improve communication between them.
· Review meetings at all levels. Review meeting at the executive level is the most important at this stage but then a Review meeting at the engineer level, at the purchasing level, and etc. I think the meetings have become hostile and little more relaxed type of meeting needs to occur.
· Awards need to be exchanged between the two companies. Especially to NorduAlu to show that Freqon still cares and they do recognize the good efforts that they are doing. This will make them feel good about themselves and what they are doing with Freqon.
· Freqon can set up some training or knowledge sharing seminars again like they use to, to share ideas and concepts that may benefit NorduAlu. And that may result in NorduAlu sharing what they are doing with their other suppliers to help Freqon out in the long run.
I think if some or even all of these practices are implemented with NorduAlu then the relationship would eventually repair itself. That over time the relationship would develop like it use to be. It is good to have a good steady relationship with NorduAlu because they have shown in the past that they are willing to cut cost, work with Freqon’s problems and issues in a timely manner, develop new product with Freqon engineers for better products. If NorduAlu has not shown this it may be difficult to trust in these developmental management tools. It is shown that they have and it has been proven in the past so I think it can and will work in the future.
Posted in
Business,
Business Management,
BYUI,
Emphasis,
Global Sourcing,
Supplier Relationships,
Supply Chain Management
|
Written on 10:07 AM by Shaun Hutchings
Describe Intercon's organization structure for procurement. Be very detailed. Bob is responsible for....
Procurement was divided up by domestic and international, where they both operated completely independent of each other. In the domestic procurement department they divided up the process into metals, plastic, and tooling. Domestic also tried to increase the amount of overseas suppliers. They purchased copper from Europe and they purchased wire from Japan because of cost reduction practices. Domestic was trying very hard to find suppliers outside the United States. Even though they did secure several international suppliers they had a rule that it could only incorporate for 50% of total purchases of a certain material. They wanted to keep their current suppliers in the United States because of the willingness those companies have in working with Intercon for technical support and development aide.
Click here to Read More >>>>
Posted in
Business,
Business Management,
BYUI,
Emphasis,
Global Sourcing,
Inventory Management,
Supplier Relationships,
Supply Chain Management
|
