Today’s article is the first of two articles from a report that we recently published, entitled, Digging Deep: Leveraging Contract Analytics to Uncover Hidden Costs, Risks, and Opportunity, sponsored by Seal and available for free download by clicking here.
Contracts are an integral part of the supply management (or source-to-settle) process and the foundation upon which modern business relationships stand. Executed contracts codify the relationships between trading partners and serve as the documents of record between them. They protect both parties from a legal standpoint, specifying the price, terms, conditions, and service-level agreements (SLAs) to which the enterprise and its supplier agreed during the negotiation process. Utilizing effective contract management strategies and systems can help procurement departments streamline their processes and improve overall compliance to contract terms, conditions, and SLAs. In doing so, procurement teams are better able to mitigate and/or avoid any number of contract, supplier, and supply risks while also improving overall performance.
Yet many procurement and contract teams today fail to effectively leverage their contracts to capture the full value from their supplier relationships. Far too often, contracts are poorly maintained – not actively reviewed or managed and accessed only when a supplier dispute or performance-related issue arises. When procurement teams fail to enact proactive contract management strategies and do not establish enterprise-level visibility into supplier contracts, they constrain their ability to optimize the value of their supplier relationships. Specifically, these procurement groups are much more likely to struggle with:
- Tracking supplier performance and identifying related issues
- Avoiding or reducing savings leakage (the gap between identified savings and implemented savings)
- Ensuring price, process, contract, and regulatory compliance
- Communicating contract terms, conditions, and SLAs to internal stakeholders
- Tracking and reducing maverick spend
- Monitoring, and thereby avoiding, unacceptable levels of supply risk
The good news is that there are a number of strategies, processes, and solutions that can be deployed to help procurement groups “dig deeper” to avoid these issues and ensure that the value residing within their supplier contracts is realized. Ardent Partners recently conducted a survey of over 300 supply management professionals on the topics of contract management and gaining greater visibility into the process. The resultant report, Digging Deep: Leveraging Contract Analytics to Uncover Hidden Costs, Risks, and Opportunity, can be very useful for CPOs and other supply management leaders struggling to wrangle their contracts and understand the opportunities and risks that lie within. It provides readers with recommendations for how CPOs and other business leaders can institute and link contract management processes for a more holistic view, as well as explore contract management solutions, particularly reporting and analytics, for deeper insight into the opportunities and risks that lie within their contracts.
Supplier Contracts and Data Visibility are two of the many topics of discussion at Ardent Partners’ CPO Rising 2016 executive summit, which will be held at the Harvard Club of Boston on March 29 & 30 2016. Preview and register for the event by clicking here.
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