Ardent Partners is pleased to announce the publication of The State of Strategic Sourcing 2015: The Four Pillars of Sourcing Success report. Interested readers can download this exciting and informative annual research report by clicking here.
Every year, the pace of business continues to accelerate, forcing enterprise sourcing teams to adapt to changes and shifts within global markets in order to stay competitive. Although workloads and responsibilities continue to increase, sourcing teams remain understaffed with little relief in sight. As a result, collaboration, early engagement, process linkage, and automation have become valuable force multipliers to help extend a sourcing team’s impact throughout the enterprise, even as it remains stretched to its limits. This article series, based on the annual State of Strategic Sourcing report, will examine the pressures and challenges facing sourcing leaders today, as well as the capabilities and technologies that they bring to bear. It will conclude with a discussion of Best-in-Class performance, followed by recommended strategies that sourcing teams can employ to accelerate their souring game into 2016.
Contract Management
Contracts are the lifeblood of an organization. They codify relationships between the enterprise and its trading partners, and they serve as the system of record between them. Procurement and legal departments use contracts to stipulate the negotiated price, service-level agreements (SLAs), terms and conditions (T&Cs), and liability and risk governing the purchase and sale of goods and services that the enterprise needs to fulfill its business requirements. That is why it is critical for procurement organizations to be able to manage the entire contract lifecycle – from contract authoring, reviewing, and execution, to contract auditing and renewal. In doing so, sourcing and procurement teams need to be agile, collaborative, and responsive in execution, and they need to have visibility into each phase of the process.Modern contract management solutions can provide CPOs and procurement staff with these capabilities. Yet, in a recent survey of over 300 CPOs and sourcing leaders, adoption levels remain low.
For starters, just 16% of procurement departments currently deploy an automated, digital contract authoring tool – an abysmal number given its functionality and the value that they can drive.
- Automated, digital contract authoring tools can allow procurement and legal departments to pull in sourcing and supplier negotiation documents into the contract authoring process to capture the prices, SLAs, T&Cs, and value and codify them into the contract.
- Teams can populate standard templates with standard clauses and language, allow multiple parties to edit the document at once, and offer “check in-check out” and redlining functionality for version control.
- Automated workflows and straight-through processing allow each party to review the contract and send it along to the next party for further review.
- Cloud-based, mobile-first/mobile-ready applications allow all of this work to be conducted virtually anywhere on any device by anyone with the proper credentials.
- Finally, digital/electronic signatures allow approving parties to sign contracts without putting pen to paper, saving all parties time, postage, and paper.
Digital contract repository adoption numbers are higher – 42% of all those surveyed currently deploy such a solution – but there is still potential for greater adoption; and for good reason.
- Digital contract repositories provide a central, searchable location for all contracts and related documents to be stored, which can provide greater visibility, drive greater internal and external compliance, enhance risk, and bolster savings/performance.
- Enterprise buyers can search repositories to find existing contracts, which can reduce off-contract/maverick spend and savings leakage.
- They can also search repositories to consult contract SLAs, which can help teams guard against last-minute supplier renegotiation attempts, bolster internal and external compliance, and further reduce savings leakage.
- And with greater visibility into contracts, CPOs can be kept abreast of contract expiration dates and make favorable decisions regarding renewal, renegotiation, or expiration.
Final Thoughts
Contract authoring and repository solutions can allow resource-constrained procurement and sourcing teams to wrangle their contracts – from supplier negotiation all the way through contract expiration. Without them, CPOs and procurement teams risk lacking the agility, collaboration, and visibility needed to keep pace with the hyper-kinetic speed of business today and dodge the associated risks. With these solutions, business leaders and practitioners can enhance internal and external contract compliance, mitigate risk, preserve savings, and deliver more value to the enterprise. But with current adoption rates below – and in some cases, well below – 50%, there is significant potential for CPOs and business leaders to automate and digitize their contract management processes in 2016.
The four pillars of the modern strategic sourcing program, including contract management, will be big topics at CPO Rising 2016. Be sure to take advantage of early-bird pricing and register for the procurement event of 2016!
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Tagged in: Adoption, Ardent Partners Research, Ardent Team, Chief Procurement Officer, Contract Lifecycle Management, CPO, Innovation, Process, Strategy, Technology
