Page 63 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes to function as arbitrators between the factory and the supplier. The buyer must enable his
supplier to make a reasonable profit in the short run and survive as well as grow in the long run.
He should remember that he is buying not only for today’s price, but for tomorrows cost as well.
In this process, the buyer helps the suppliers towards finding more economical ways of working
rather than squeezing out the profit margin.

5.1 Meaning of Negotiation

Negotiation has been accepted as a policy by some material managers, since perfect competition
does not exist in Indian situations and hence the concept of lowest bid does not always work.
Selling at a loss will drive the supplier out of business reducing the Sources of supplies. Art of
negotiation is treated as a forum for exchange of views rather than cut throat buying.
In negotiating both the buyer and seller try to evaluate each other with regard to price and
quality.
The word Negotiation is derived from Latin civil laws. It refers to ‘Trading and Deliberations’
leading to purchase or sale agreement of goods and services. Negotiation may be defined as
“what passes between the parties incident to the making of a contract”. According to another
definition negotiation means “to discuss or arrange business transactions.” For Harold bloom,
“Negotiation is essentially a communication.”
Thus, a negotiation is essentially a discussion on business transactions leading to finalization of
purchase and sale contract of goods and services. It is not a discussion on price only; it is only one
of the important points of discussion in any negotiation between the parties who deliberate to
make a contract. A negotiation is a discussion on all aspects of a contract. It includes deliberations
between trading parties on:
1. quality
2. quantity

3. price
4. time of delivery
5. place of delivery

6. mode of transportation
7. packing and packages
8. after sale service
9. mode of payment, etc.

Did u know? The bargaining power will definitely be influenced by the preparedness of
the buyer as well as the place and time of negotiation.
It is not uncommon to find negotiations taking place over a cup of tea or beer.

Self Assessment

Fill in the blanks:
1. ………………….. refers to ‘trading and Deliberations’ leading to purchase or sale agreement
of goods and services.

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