Authored by Pete Hodgkinson
The discussion regarding whether or not procurement is the right fit to own contract management was certainly a lively one. Let’s push that aside, and discuss why contract management really matters, no matter who takes charge. I talk about contracts with my colleagues or clients, it’s often about managing risk. However, there are additional opportunities with contract management. For example:
1. Getting the business to actually use the contract in place through visibility and promotion, rather than turning to new suppliers, is the only way a contract will have any value
2. Addressing supplier compliance, often seen as a risk, gives the buying organization the ability to ensure delivery of services and to achieve those all important discounts that were originally negotiated which can slip away throughout the life of the contract.
3. Ensuring that a contract includes the opportunity for direct cost improvement, for example, via volume-based price or addressing the possibility of inflation
4. Adding supplier value beyond negotiated savings, such as encouraging and incentivizing suppliers to be innovative in their approach to deliver the contract
5. Developing strategic supplier relationships. Contract management offers the opportunity to conduct supplier analysis, segmenting suppliers to determine the appropriate relationship – not all will be strategically important and require partnerships for instance.
If you had to pick, which of these benefits would improve your organization the most?