A Simple Guide on Contract Negotiation Process

Overview

A basic overview of how we execute a contract negotiation process including the factors we consider before having them as part of our sourcing operations; it is a necessary process to screen suppliers and make sure we are both on the same page in terms of quality service.

Article Highlights

  • Contract negotiation process involves multiple factors along with terms and conditions before a final contract gets signed.
  • Most companies right away go for the lowest production cost which is practical but wrongdoing.
  • Quality of service and delivery time are very important components of the contract.

As a global sourcing company, we expect to work with companies from different countries rather than exclusively working with a single country or nationality. Geographical locations, culture, and communication play huge roles in our working relationships which is why it is necessary for us to document our agreement in the form of a contract. Our contract negotiation process involves multiple factors along with terms and conditions which are tightly considered before a final contract gets signed. Here are a few factors to our contract negotiation process you need to know of.

contract negotiations introduction contract negotiation process - Intrepid Sourcing

Factors to a Contract Negotiation Process

  1. Pricing

Pricing makes or breaks a contract negotiation process.

The most common reason why disagreement arises in the contract negotiation process is due to pricing. Most companies we come across right away go for the lowest production cost which is practical but wrongdoing. Always keep in mind quality comes with a price. If you go ultra-cheap then quality is surely sacrificed. The people we end up signing contracts with are usually reputable and the pricing towards their services are justifiable which is congruent to our goals in this company: provide quality service at a reasonable price.

  1. Service Quality & Delivery Time

Service quality and delivery time are key factors in the contract negotiation process.

Quality of service and delivery time are very important components and are primary concerns for the terms and conditions during the contract negotiation process. You need to be assured of their service quality and they should promise to deliver on time. If both parties cannot meet on these factors, then a contract drafting is not happening any time soon. Also, you must hold a party liable in case they fall short of the standards set or be tardy in delivery time. This clause should be discussed clearly during the contract negotiation process.

  1. Communication & Culture

Why communication and culture vital to the contract negotiation process?

There must be clear communication lines between our company and the suppliers or manufacturers we work with. We understand things could go wrong somewhere in the production and they could be inevitable. They must be honest with us, so we can prepare our ad hoc processes to suppress the issue. If these issues are not communicated right away, then problems would reflect badly on our company and to them as well.

Understanding your potential business partner’s culture is important because even if work is constant, our approach and behavior towards it differ depending on our cultures. In our experience working with different nationalities, we modify our terms and conditions compliant with the other party’s culture and yet stick to our company’s standards. We just alter stuff within the contract negotiation process based on their working conditions and other factors revolving around their work culture.

Contract drafting will easily follow if the factors mentioned above are agreed upon by all parties involved and the contract negotiation process goes on smoothly. Your company’s terms and conditions should be set at a standard and applies to any contract negotiation process you offer your potential clients in the future. However, always be open to changes and possibly alter these items after the contract negotiation process not just for the benefit of your company but to your partners as well. This move will also make the contract negotiation process easier later in the future.

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