SCENARIO:

• ABC Cosmetics has been operating for 8 years as a cosmetics retailer in Australia, New Zealand and some smaller countries in the Pacific Rim. They have experienced significant success with their eco-friendly products, and their loyal consumers are eager for more products to be offered by ABC!
• ABC has exponential growth plans on their horizon and are excited to continue to serve and delight their consumers in even bigger ways in the next decade and beyond! One such initiative is in the area of facial moisturizing creams. Research & Development have developed a hypoallergenic formula to be applied before putting on makeup each day to moisturize the skin but also protect the skin from exposure to the hot sun with an equivalent of SPF 60 protection. This is very unique in the industry and is projected to be a significant growth initiative for ABC~ it could be the start of a whole new chilled cosmetics product line!
• From the supply chain perspective, this new innovation introduces an additional complexity to solve for: this new cream must be kept refrigerated and has a 90-day shelf life. Consumers can keep it in their kitchen refrigerators; however, ABC has never used refrigerated warehousing, carriers, etc. and has not managed perishable or short shelf life products in their portfolio.
• ABC currently contracts their production to 3PL manufacturing plants who then ship the product to two different warehouses: XYZ Fulfilment Co. and MNO Storage Ltd., where their products are warehoused then shipped to Chemists (pharmacies) and other retail stores in the pacific rim. Both of these suppliers are located in Sydney; when ABC first opened its business, they hired MNO as their 3PL warehouse, however as ABC continued to grow, MNO did not have room for their additional volume. ABC was very pleased with MNOs service and the strong relationship that they had developed, so they chose to stay with MNO for some product lines ~ last year, they hired XYZ as an additional warehousing team for other product lines.
• ABCs supply chain team knows that the launch of the new cream will require very strict date code management for inventory control to avoid aging costs. In addition, one of the keys to the success of this very strategic offering is to ensure consumers receive the product with enough life remaining to enable them to use each container before it expires. Therefore, ABC management has mandated that the supply chain team set a 60-day warehouse life on the product. This means that product must be produced, shipped to the warehouse and then shipped to customers within the first 30 days of its shelf life all planners and shippers will need to manage this product carefully!
• ABCs procurement manager has done an exhaustive search to understand market pricing of automated chilled warehousing space and has learned that the average price per pallet is AU$47.00, which includes system management of date coding for inventory control and traceability for chilled cream shipped on customer orders. This is approximately AU$17 per pallet ABOVE the budget provided by the finance team! Chilled storage is such a vital element of this new innovation, but at what cost?!
• ABCs procurement team needs to come up with a viable solution for this launch. Fortunately, XYZ has refrigerated storage capacity in their facility, and has indicated that they would charge ABC a rate of AU$27/pallet. The ABC procurement manager has a been trying to find a way that XYZ will agree to invest in an automated system for inventory and date code tracking, however the XYZ team has pushed back as they do not have the volume with ABC to justify such a large investment.
• You are the leader of ABCs procurement team, and it is your responsibility to negotiate a solution with XYZ Fulfilment Co. so that you can contribute your portion of the solution for this very important chilled cream launch. Your success during the negotiation process will be determined by two factors:
• The price per pallet does not exceed AU$30 /pallet; and

Accurate date code management processes support effective inventory management and the ability to track which lot codes are shipped on each customer order.

Complete the following sheet BEFORE negotiations -

	Your Company you are negotiating FOR ABC	The other Company who are you negotiating WITH XYZ
Key Players	Team Leader Leading negotiation process & rep. ABCs interests
Key Players	Legal Analyst Provides legal expertise & ensures contract terms align with ABCs interests
Key Players	Financial Analyst Assesses financial implications of various negotiation outcomes; Determine favorable price/pallet
Key Players	Technical Expert Offer technical insights w.r.t to inventory system & date code tracking
Key Players	Bridge Builder Focus- Building a positive & cooperative working relationship with XYZ
Interests & Needs concerns, needs, desires, hopes or fears of the company
Options provide legal expertise and solutions to ensure contract terrms align with ABC's interests and to conduct successful negotiations.
BATNA your Best Alternative to a Negotiated Agreement = the most attractive option available to you if you do not make a deal with this company
Relationship How important is the business and working relationship with the company you are negotiating with?
Communication What communication styles and tactics will each party use in the negotiations and why?