Steel Strap Supply Agreement Conclusions

The simulation for Cyberweek 2003 successfully demonstrated the use of Smartsettle to settle a supply agreement negotiation with ten shared decision variables. The entire simulation was done online except for a few face-to-face meetings between two of the players and their facilitator. The Smartsettle negotiation software was supplemented with telephone conference calls, email and instant messengers.

Agreement reached

The following table shows the agreement reached by Supply and Buyer. They decided that the new agreement would be identical to the prior agreement except for the following:

Prior Contract Improvement 8
Term (months) 36 90
Committed volume (%) 90 73
Steel Strap price ($/10 kg) 12.83 12.76
Seals price ($/1,000) 44.00 41.00
Edgeboard price ($/1,000) 64.57 65.85
Minimum order size (@10 Kg) 60 80
Order Lead time (hours) 48 24
Price index interval (months) 6 6
Invoicing Frequency (days) 30 90
Payment terms (days) 30 120


The following graph in satisfaction space plots the exchange of concessions and publishing of Suggestions in relation to the Prior Contract. The Prior Contract defined the minimum satisfaction acceptable to each party and therefore a Zone of Potential Agreement.

Following Supplier 4, three Suggestions were made available for acceptance (Package 7 shown). Buyer and Supplier accepted Suggestion 7 which became a Baseline agreement. Finally, Smartsettle   generated Improvement 8, which was slightly better for both parties and became the final agreement. You can see from the graph below that Suggestion 7 was able to quickly resolve the distance between the parties that was still quite wide after the last concessions.


Using the scales chosen by the parties for measuring their satisfaction, the average improvement of the final agreement over the Prior Contract for both parties was about 30%. The authors believe that this simulation was   a realistic representation of what could happen in a real case. However,   every situation is different and caution is advised in projecting potential   benefits for real negotiations based on the results of this simulation.