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Effective Supplier Contract Management Captures 50% More Savings
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Effective Supplier Contract Management Captures 50% More Savings

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Supplier Contract/Agreement Management is the link between Strategic Purchasing value creation and Tactical Purchasing's ability to capture value. Cloud based Software as a Service solutions offer …

Supplier Contract/Agreement Management is the link between Strategic Purchasing value creation and Tactical Purchasing's ability to capture value. Cloud based Software as a Service solutions offer small, medium and large business a relatively low total cost solution that will capture more savings.

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  • 1. Effective Supplier Contract Management Captures 50% More Savings Supplier Contract/Agreement Management is the link between Strategic Purchasing value creation and Tactical Purchasing's ability to capture value. BillKohnenAsiaPurchasing ConferenceShangriLaFutian 2011
  • 2. Overview • A Supplier Contract Management process is typically not viewed as a strategic imperative. • A Contract Management process is the main key for fully capturing up to 50% more real negotiated savings. • A Contract Management process also can result in improved productivity of stakeholders and ultimately better customer satisfaction • A process does not need be overly complex or expensive whether internally developed or provided by a third party as Software as a Service cloud based solution. BillKohnenAsiaPurchasing ConferenceShangriLaFutian 2011
  • 3. Contract or Agreement? BillKohnenAsiaPurchasing ConferenceShangriLaFutian 2011 • Contract management – That Suggests a static lawyerly document that is focused on detailed protections against things not likely to happen with business terms as an addendum • Agreements are focused on what will drive mutual value for 2 parties looking forward and how they will measure and achieve success. Naturally in todays world agreements are flexible and subject to modification to reflect changing conditions • Purchase orders are contracts
  • 4. Best Practice It is not best practice for purchasing organization to have an overly legalistic and view of contracts/agreements/purchase orders. Best Practice: • Relies on boilerplate terms. • Almost never requires a Legal review of any agreement. • 90% of contacts/agreements are purchase orders • Focus is on clear reasonable business terms. • Terms of key agreements available to all stakeholders • Process capture more negotiated savings
  • 5. Agreement Managementis the LinkBetween Value Creation and Capture Tactical Purchasing Value Capture Agreement /Contract Management Process Strategic Sourcing Process Value Creation Even world class organizations can fail to capture 25% of expected savings while for other organization s the actual savings can be less than 50% 0f expected
  • 6. Agreement Stakeholders Agreement Accounts Payable Legal Strategic Purchasing Tactical Purchasing Finance Product Line Quality Suppliers Customers With so many stakeholders no wonder compliance is a challenge
  • 7. Typical Approaches to Managing Agreements Individual Does All Can manage up to 12 agreements effectively Multiple Stakeholders Attempts to centralize agreements on shared drive or even physical central file Duplicated effort an failure to capture savings significant 30% to 40% Many Dispersed Stakeholder Might be centralized at site or regional (share point, enterprise tools) but challenge across organization. Failure to capture saving approaches 50% . People do not even try to avoid duplicated effort Small Company Medium Company Large Company
  • 8. Emerging Better Options 1. Cloud Based Software as a Service solutions that provide core features at a total cost that is lower than trying to manage internally. 2. Solutions that are integrated into a purchasing suite 3. Some organizations use other third party tools such as Salesforce combined with an electronic signature tool like Adobe. While this appears a reasonable option utilizing what may be existing solutions it can be expensive to scale ultimately access will be limited because of cost. 4. Outsource to a shared service center in a low cost country . While the actual work may be manually intensive there, the total cost and level of service can be better. BillKohnenAsiaPurchasing ConferenceShangriLaFutian 2011
  • 9. Summary • Effective Supplier Contract/ Agreement Management is important to fully capture negotiated savings • Small, Medium and Large business can utilize reasonably priced cloud based solutions to capture more cost savings. BillKohnenAsiaPurchasing ConferenceShangriLaFutian 2011