Computational Model of Collaborative Negotiation System

Discuss about the Computational Model of Collaborative Negotiation.

Food and beverage industry is most challenging as well as competitive industry in the entire world. Multinational F&B Company (MFB) is an organization which produces innovative food products for their customers. The company requires assessing direct as well as indirect raw materials sourcing contracts. Instability into price of the raw materials assesses the suppliers on different parameters and then discusses contract terms in order to drive high savings (Ludema & Mayda, 2013). Negotiation of the goods as well as works procurement is not negotiated except in some of the cases based on the complexity of requirement of the food industry. Negotiations with the consulting firms are based on the method of procurement. The report is based on determination of the key factors required to negotiate and evaluate of the competitive advantage of the MFB. The food industry requires developing of their negotiating strategies. In order to negotiate of their food products, MFB analyzes and selects of contract management techniques for their successful negotiation. It controls the cost of contract, schedule and performance, managing of contract changes, contract claims with contract close out of the MFB. Uniform commercial code (UCC) and applicable government regulations are required to analyze the commercial terms for MFB.

With schedule of natural gas contract for renewal, then the client should have complete understanding of the factors which may affect their natural gas pricing. Lack of supplier market intelligence is a key challenge while negotiating on the price and other contract terms. Effective negotiation helps the organization to build stable business relations, overcome with the conflicts with the suppliers and bring more income to the company (Carneiro et al., 2013). MFB Company saves of millions in their sourcing of energy throughout GEP market intelligence. The global energy experts of GEP help the client to determine the supplier of natural gas and negotiate of agreement. MFB wants to negotiate based on the factors such as time of delivery, payment, culture and quality of the goods (Merrills, 2017). The food and drink industry views good deal for meeting with the customer’s requirements. Following are the list of key factors used at the time of negotiation of the agreement:

Price: Before the negotiating of the agreement, the food industry should require to get the price list of the products from the suppliers. It is required to calculate the cost of each product from the supplier separately. When the price is low, then the organization should check for the quality of the food and drink (Li & Du, 2013). If MFB is a premium customer of the supplier, then they ask for huge discount to get best deal of the food items.

Quality: It is required to do a basic research about the potential supplier to get an idea of the quality of services they offer to their customers. It should make sure that the suppliers have cash flow to deliver quality food products as per customer’s requirements (Amorim et al., 2016). Proper time to make an agreement with the supplier is also important which should be in end of the month. The sales person is needed to meet monthly sales quota. The contract administration should ensure for day to day procurement of the activities by following the sprint. Improvement into the procurement environment means there is greater efficiency and there is increase into profit.

Delivery schedule of the ordered goods: When MFB signs contract with the supplier, then it should require making sure that the supplier deliver the ordered goods on time. Therefore, it should be ensured that delivery time schedule is mentioned into the agreement properly (Sebastiani, Montagnini & Dalli, 2013). It is also required to ask the suppliers about their transport channel. Therefore, it is ensured that the products are delivered on scheduled time.

Transport of the packaging: It should be logical that the supplier with each of the delivery of the ordered products drove left returnable packaging. Therefore, a clear agreement should be done to agree with the supplier for transportation of packaging (Dixon, 2015). If the supplier is adhere to their agreement, then call the delivery chief and show them about the problems.  

Culture: In different country there is different culture, therefore the process of negotiation is also different. The factors which are required to focus on are physical contract with the supplier, physical distance, eye contact and others (Bailey & Garforth, 2014). Even they have different attitude which makes a lot of difference in negotiation.  

In the challenging environment, the food player is forced to select, source and manage of their products. MFB should of innovative ways to reduce their total cost and unlock of hidden values of their raw materials. It allows the food company to keep 2-6 percent of the cost of direct materials (Kajzer Mitchell et al., 2017). It also saves 8-22 percent of cost of conversion. In order to make improvement into 1 percent of the direct materials cost, MFB can improve the net margin by 200-300 basis points. Contracting plan for MFB supports the procurement approach of their negotiation (Dong, 2016). The factors chosen are uncertainty of the scope of work required, other party assumed of risk due to increase into unexpected cost, importance of meeting to schedule of the time and requirement of predicable project cost (Lee, 2014). Therefore, if MFB will negotiate based on those factors for their energy supply, then it becomes successful and profitable in their business.     

Development of negotiating strategy for MFB

Before starting of the negotiation, MFB sets up clear goals and plans negotiation strategy. The priorities of the organization are lower price, higher specification of the goods and delivery of the goods on time (Van Kampen & Van Donk, 2014).  Following are the negotiating strategies for MFB to make a negotiation for their natural gas pricing:

Internet of the client and other party: Interests of both the parties are required for making a negotiation agreement with the supplier (Brett, 2017). Higher interest creates sense of mutual understanding between the parties and there will be an open line of communication to discuss the business negotiation. Therefore, a good agreement requires interest.

Brainstorming: Both the parties should do a brainstorming session to create an innovative value for their negotiation. As this negotiation between MFB and GEP is to negotiate their pricing techniques for outsourcing of natural gas, therefore this session should create of value for both client and supplier (Thomas et al, 2013).

Open line of communication: Both the parties should have open communication to discuss of their interest, requirements and marketing strategies. Before going into negotiation room, write out of the questions which are required to ask before negotiation of the agreement (Szufel, Kaminski & Szapiro, 2014). It is most important strategy to do frame of the interests and communicate with the shared interest to other party.

Relationship: A good negotiation relationships required for addressing of the differences and also conflicts. Therefore, it would plan, prepare and maintain of good working relationship between the client and also supplier (Perreault, Kida & Piercey, 2013). Good negotiator is looked for better opportunities in order to enhance relationship as well as strength of their position. There should be proper communication among both vendor as well as purchaser.

Management of changes: Into a long term of procurement relationship, there are some changes into the activities, necessary and availability of the products. All the changes are required to note in addition to handle correctly (Abdul Rahman, Choe & Park, 2017). The entire process of procurement activities are to be assessed on continuous basis in order to make sure that the contracts are adhere and there is follow of the purchasing processes. Therefore, required improvements and changes are to be done to increase the efficiency and productivity for MFB.       

Analyzing and selecting effective contract management techniques

Client manufacturing unit of Australia is scheduled their contract for their natural gas which is primary sources for processing of energy to power. Ouali, Sabouret and Rich (2017) stated that contract management techniques are used to control the cost of contract, its schedule and performance factors, management of the contract changes, contract claims and close out of the contract. The techniques for MFB are the processes in addition to procedures which the food industry implements in order to manage negotiation, performance and termination of the contracts with other party (Cao & Peng, 2016). Following are the techniques which are required to follow when making a negotiation with the third party supplier.

Investigation on the supplier: A thorough investigation is done for the business as well as background of the contract and transactional with business relationship (Phillips, 2016). Special considerations are to be made which impact the existing obligations of the company along with business relationships.

Good business relationship: There should be good understanding of the scope of business relationship. The contracts and documents are required to be documented the relationship and completed transaction (Dixon, 2015). When there is a good relationship among the supplier and customers, there is no possibility of conflict. Procurement contractual relationships have the ability to deliver of services and providing of products to the customers. When there is delay into delivery of the products, then the company is unable to provide services to the customers.  

Agenda of the supplier: The procurement negotiation team gathers of valuable information about the supplier before being of the negotiation. The client gathers information are attendee names, email address, phone number those will represent the supplier into negotiations (Ouali, Sabouret & Rich, 2017). There should detailed information to be there with the client to contract them in any situation. The global energy expert of GEP conducted regular assessment to help their client identification of suitable supplier of natural gas. An in-depth analysis is done to search for the proper supplier.

Purchasing strategy: MFB posses purchasing strategy which is focused on value for the money as well as effective procurement activities. Both the staffs as well as vendors should be aware of the purchasing strategies. Key performance indicators are placed with the vendor. It is measured the performance of vendor and encouraged them to reach out the excellence (Abdul Rahman, Choe & Park, 2017). It provides with detailed quality performance as well as quality services required to deliver on daily basis. It is an important requirement of the contract management process.

Monitor of the vendor: There should be regular monitoring of the vendor so that the negotiation agreement is maintained properly. It is done with use of installed software. Delivery, price, quality as well as handling of the products are to be monitored. All the negotiation issues as well as problems are to be managed and it is escalated to the management level (Zou, Wang, & Orgun, 2016). It is required to be solved on provided timeframe.

Amendment in the contract: From the beginning till the end, revisions as well as amendments are required to be done through the lifecycle of the contract. There is implantation of reliable processes used to keep track of the changes on will of the client (Van Kampen & Van Donk, 2014). It is also concerned that the changes would affect the party at what level.

Conduct of regular assessment: The suppliers are fulfilling the commitment of the client at affordable prices. Regular assessment is conducted based on the situation on particular vendor (Sebastiani, Montagnini & Dalli, 2013). The market intelligence of the supplier helped to gain transparent insight into the pricing of the natural gas into Australia. Regular assessment is conducted to forecast the price related impacts due to local development. Negotiators are assisted to minimize the impact of the pricing of natural gas.

Help the suppliers to work efficiently: 80 percent of the cost of the components is fluctuated widely, therefore there is no guarantee that the price of the product is fixed. The price of the natural gas is not fixed; it may change from time to time (Ludema & Mayda, 2013). Sometimes, it increases and decreases.

The agreement is between MFB Company and GEP. The terms and conditions of their trade are applied to each order for the products as well as services including sourcing of the natural gas. UCC is a number of uniform acts which are put in a goal to harmonize the law of sales as well as commercial transactions across Australia (Ouali, Sabouret & Rich, 2017). The role of UCC is to modernize the contract law and permit for exceptions from common law into contracts among the merchants. UCC requires addressing the growing issues of the business. There is an increase into legal as well as contractual requirements to do the business. There is also a difference into state law which makes difficult for the business to locate their business into other state (Ludema & Mayda, 2013). There are nine articles of the UCC is a set of law which is governing of sales, lease of the goods, negotiable instruments, deposit into the bank, investment securities, secured transactions, bulk sales, transfer of the funds and letters of the credit. Some of the articles used in this case are as follows:

Sales of the goods: The goods which are used into UCC are movable items of the personal property which are in existence at time of specification for the sale into the contract (Sebastiani, Montagnini & Dalli, 2013). The time for delivery of the manufactured goods, machinery, vehicles and other products exist into tangible form. There is huge burden on the merchants those are dealt regularly with this type of selling of good as because they are more sophisticated and have more advantage into contract negotiations. It sets out rules on selling of goods, terms for goods delivery, right inspection, and rejection of the goods and providing of satisfaction to the buyer (Szufel, Kaminski & Szapiro, 2014).

Leases: In this terms, it governs the lease of the goods where the transactions where the owner of the property takes permission from other party to use of property in exchange of the regular payments. Specific disclosures are to be made when lease to the customers which includes of comprehensive description of leased property, amount to be paid and due date with breakdown of the payment for the products (Cullen et al., 2017). Late payment as well as default charges is to be included into this lease conditions.

Bulk sales: It deals with the bulk transfer and sales of the entire inventory of the business which is accomplished with the going out business of the company (Amorim et al., 2016).

Secured transactions: It regulates of rights of the debtors as well as creditors when the personal property is used collateral for extension of the credit. This type of transaction is known as secured transaction and interest is held by the creditor is security interests. Interest takes up priority, and then it defines order in which the debts are paid off into insolvency proceedings (Zou, Wang & Orgun, 2016). It has highest priority which is paid before those with low priority.

UCC covers of transactions pertain to the sale of the goods along with commercial transactions. Sales of the goods refer to buy and sell of the tangible products. The commercial transactions include of personal banking, certified as well as cashier checks (Ouali, Sabouret & Rich, 2017). Article 3, 4 and 5 deals with the negotiable instruments like the check, article 4 covers with the banking transactions and article 5 means letter of credit among the parties. Article 6, 7, 8 and 9 in which article 6 and 7 deals with bulk transfer with carrier of the goods. Bulk transfer is discussed with the article 8 which is encompassed with buyers of the inventory where there is purchase of the inventory quantities (Van Kampen & Van Donk, 2014). Into the article 7, there is carrier of the goods which refers to the company. Both article 8 as well as 9, it is applied with the financial transactions consist of investments along with secured transactions.

Conclusion

It is concluded that negotiation of the contract is done in a hope to attain and increase of profit. Proper negotiation between customer and supplier reduces the time of delivery, reduction of cost and access to the skills they require to hold the negotiation. MBF requires calculating the cost of the product from the supplier. If the price of the product is low, then the company at first checks for the quality because they think that lower price leads to bad quality. It is ensured that the products are to be delivered on time with good quality. Proper deliver time should be mentioned into the negotiation document. The contract management plan for MBF supports the procurement approach of their negotiation process. Apart from all this, MFB uses some of the negotiation strategies such as interest of the client and supplier, brainstorming, proper communication, proper relationship as well as management of the changes.

From the entire report, it is analyzed that the negotiation agreement of the company is required to be followed some of the contract management techniques such as investigation on the supplier, good business relationship, agenda of the supplier, purchasing strategy and monitor of the vendor. Key performance indicators are used to check for the quality and monitor the vendor if it is right decision to select right vendor for the company. The suppliers should focus on time, quality and cost of the product which should be mentioned into the agreement. The complete procedure of procurement activities are to be reviewed on constant basis in order to formulate sure that the contracts are hold and there is pursue of the purchasing processes. The key performance indicators are used to check for the quality as well as monitor the vendor.  Performance is measured based on the timely delivery of the supplier to the client.

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