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Procurement- Contract Management

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The power point presentation describes about the Procurement- Contract Management in detail. Some important points are covered here that will help you know, why contract management is necessary.

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Procurement- Contract Management

  1. 1. P ROCUREMENT - C ONTRACT M ANAGEMENT www.businessservicessupport.com
  2. 2. WHY CONTRACT MANAGEMENT? ELEMENT TWO: RATERS  The next key element to decide upon is the raters – who are the individuals who will participate in the evaluation of your suppliers?  Obviously, your organisation’s purchasing and supply management staff should participate because that staff is ultimately responsible for the performance of your suppliers  But do not stop there! It is extremely important to get the input of other stakeholders in the organisation  If you work in a production environment, be sure to involve your engineers and quality staff  These folks have a vested interest in the performance of your company’s product or service and usually are more than happy to give their opinions on how well suppliers support their goals Suppliers 2 Raters Performance Supplier Rating Program COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  3. 3. WHY CONTRACT MANAGEMENT? 3 ELEMENT TWO: RATERS  Working in a non-production environment, end users of the products or services of the selected suppliers, would need to be included  Let’s consider copy paper as a commodity purchased from one of your selected suppliers  You, in purchasing, may not use copy paper as much as some of your company’s end users and, therefore, may not be able to comprehensively evaluate your paper supplier’s performance  Meanwhile, your company’s biggest end user of paper may find her copier jamming constantly because of poor quality paper  You need that person’s opinion when rating your paper supplier. Never ignore stakeholders or end users in the supplier evaluation process Suppliers Raters Performance Supplier Rating Program COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  4. 4. WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES  The third key element of a supplier rating program is the group of performance measures that you select  Performance measures are those important, specific facets of suppliers’ performance that you will rate  Performance measures will differ from organisation to organisation based on the needs of each particular organisation  However, performance measures usually fall into one of four categories:  Cost  Delivery  Service  Quality Suppliers 4 Raters Performance Supplier Rating Program COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  5. 5. WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES  Cost performance measures relate to the direct financial impact of a supplier’s performance and can include:   Price, payment terms, shipping charges, savings from process improvements, and so forth Delivery performance measures relate to a supplier’s ability to support your scheduling requirements and can include:  On-time delivery of goods, on-time completion of services, stock availability, or anything related to the cycle time between order and receipt Suppliers 5 Raters Performance Supplier Rating Program COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  6. 6. WHY CONTRACT MANAGEMENT? ELEMENT THREE: PERFORMANCE MEASURES  Service performance measures relate to the personal and electronic interaction between the buyer and seller and can include:   Responsiveness, resolution of problems, technology used to provide customer service, and so forth Quality performance measures relate to the conformance of a product or service to requirements and can include:  Rejection rates, warranty claims, technology used to improve products and services, and other metrics related to the durability, reliability, and consistency of a product or service  Each performance measure that you ultimately select should be specific and measurable  For example, on-time delivery is specific (a delivery is either made by a certain date or it is not) and it is measurable (a delivery was 3 days late) Suppliers 6 Raters Performance Supplier Rating Program COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  7. 7. FRAMEWORK FOR MANAGING CONTRACTS (S.L.A’ S ) Methods of Rating Once you have made your decisions relative to the three key elements of a Be advised that the performance supplier ratings program – suppliers, measures you raters, and choose and your performance method of acquiring measures – you information have a must decide how to dependency on one acquire information another about your performance measures 7 The performance measures you choose may drive how you go about acquiring the information Also, limitations with regard to acquiring information may require that you "tweak" the performance measures that you have selected COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  8. 8. FRAMEWORK FOR MANAGING CONTRACTS (S.L.A’ S ) Methods of Rating (Cont) The ideal situation is The ideal situation is one in which you one in which you have the means of have the means of acquiring the acquiring the information you information you need to support your need to support your selection of the best selection of the best performance performance measures for your measures for your company measures company 8 Having such means may or may not be realistic in your particular situation While there are many ways of acquiring information and then converting that information into supplier ratings, we will focus on three of the most common: Supplier scorecards System metrics Supply chain event management (SCEM) software COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  9. 9. FRAMEWORK FOR MANAGING CONTRACTS (K.P.I’ S ) SUPPLIER SCORECARD:   The supplier scorecard approach gained popularity in the 1980’s  Each rater will receive one scorecard for each supplier being evaluated  9 Supplier scorecards are a common starting point for organisations who wish to have some method of rating their suppliers Each scorecard represents a survey of the rater’s opinion of that supplier’s proficiency for the selected performance measures COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  10. 10. FRAMEWORK FOR MANAGING CONTRACTS (K.P.I’ S ) SUPPLIER SCORECARD (CONTINUED):   For example, a performance measure may be "Adheres to delivery schedules" and the rater may assign a score of 1 to 10 where 1 indicates that the supplier never adheres to the delivery schedule and 10 indicates that the supplier always adheres to the delivery schedule  10 The scores for each performance measure are usually based on a scale where low scores indicate poor performance and high scores indicate good performance Scores for each performance measure are then added to produce a total. Suppliers can be ranked from best to worst by creating a list of your suppliers and their total scores, then sorting it from highest score to lowest score COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  11. 11. CASE STUDY? IT’S TIME FOR A CASE STUDY 11 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011

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