“A Difficult Negotiation I Did In the Recent Past”

Since joining L&T I have been part of a lot of negotiations sometimes with
management, sometimes with colleagues, sometimes with vendors, sometimes with
on strike workers but what I will like to share is a negotiation experience with a small
vendor just a few months ago. This negotiation was unique as timely delivery of one
of the most prestigious projects for L&T Shipbuilding was depending on it. In March
2018, L&T Shipbuilding had delivered its first naval project (First on schedule delivered
naval project by any Indian shipyard), but everything was not as smooth as it sounds.
Just six months before delivery somewhere in October 2017, when our purchase
department was busy finalizing the list of spares and equipment to be supplied with
the Ship, they came across equipment which was not a standard item and hence
cannot be procured directly. The item was 3 MT Mobile crane (Two Nos.). None of
the reputed crane vendors had the ready stock of these cranes, and none of them
wanted to manufacture a small quantity for L&T. So, after days of efforts, we found a
vendor based in Okhla, New Delhi. The name of the vendor was M/s Amro Cranes.
So the process started, I went for their shop inspection to access the capability
and size of the vendor. It was a small shop with some 6-8 workers and a supervisor
engineer. The vendor also didn't have any ongoing project at that time. So, It was very
risky to bank on this vendor but we neither had time to find a new one nor were we
sure to find a right vendor who can manufacture a customized crane (As we had
already talked with most of the reputed vendor). So, we decided to go ahead with Amro
Cranes. In Mid-October we had the first meeting with Amro Crane reps they visited
our office to have a discussion and finalization of drawing and timeline of the
manufacturing. Mr. Abhishek Kumar (Owner Amro Cranes) & Mr. Raghwendra
(Engineer/Shop IC – Amro Cranes) came for the discussion. We gave them the
general drawings of the type of cranes required. We also gave them the specifications
sheet and BOM, in which some areas of specification and material were flexible while
some are pretty stringent as they were customer’s/class’s requirement. They agreed
to manufacture a crane as per specification but told us that they need five months to
deliver two cranes as some materials mentioned in the BOM were not readily available
with them or with their vendors and hence need time for procurement. Five months
was not acceptable to us as vessel delivery was scheduled in March. We were ready
to give them maximum 2 – 2.5 months. After almost an hour of discussion, we didn't
come to any conclusion regarding delivery time. So, we told them that five months is
not acceptable as it will affect our delivery and we asked them to tell us the material
which they cannot arrange we will see if we can do something. So, they told us that if
we can help them with three parts/material they will finish the manufacturing in 1 – 1.5
months. The material they asked for were 20-meter class approved marine grade
hydraulic hose, a forged marine grade steel hook and a marine grade steel hydraulic
piston. The problem looked to be genuine as Amro crane had no prior experience of
supplying cranes for ships and ships usually requires marine grade materials. Meeting
ended, and we told them to meet in two days' time to finalize everything. During this
time we contacted our production department in Katupalli, Chennai as we were sure
that marine grade Hose pipe could be arranged from the yard as it is used in ship's
hydraulic system. After taking to pipe shop in-charge in our yard, we found that we can
get 20 meters of hose from there after some approval which will take a day and it will
take almost a week time for the material to reach Delhi. We made sure pipes got
couriered from there in two days. We also spoke to the vendors from where we
procured marine grade steel for our use and requested them to supply material to
Amro Crane.
During our second meetings we told Amro Crane reps that we had almost
resolved their material issues and now they will get everything which they needed for
timely completion in 15 days, but the cost will be deducted from their bill. After which
they committed to the timelines and agreed to supply two nos. 3 MT mobile cranes in
one month after receiving the material. But our problem did not end there. During the
meeting, we casually enquired about load trials of the crane and a third party
certification which is a ubiquitous requirement for any load handling equipment for
which they answered that you would get a certificate. To be sure that license is proper,
and the third party witnesses load test we asked for presence of L&T rep during the
load trial for which Owner of Amro cranes, Mr. Abhishek was not ready (May be due
to an understanding with the third party to issue a certificate w/o load test), he wanted
to have two different load tests for third party and L&T rep instead of a common one.
We were pretty sure that something is not right so we insisted on this and also told
him that we are helping you with the materials so you have to agree to our demand.
He finally agreed.
 L&T purchase department issued the purchase order and all the critical
material reached to the vendor as promised. Mr. Abhishek called me and gave me
another problem. Now, He wanted full payment in advance to start the work. It was
partially our fault, as during discussion we got too much into materials and inspections
that we forgot to discuss payment part. This payment term was never acceptable to
us as the vendor was small and it was risky to give the full amount in advance. I went
to his shop to have a discussion I told him that L&T doesn't give full advance to any of
its vendors. And I gave him an option to take 50% payment on successful trials and
balance 50 % on delivery for which he did not agree initially, but I became firm and
told him that this is the best he could get. So after much discussion and debates, he
finally decided to go with the part payment option. After all this everything went
smoothly. Delivery of cranes were delayed by 20 days but we had anticipated that
during the negotiations and hence kept delivery time shorter intentionally.