Maximising added value through supplier and contract management

By Mike Elliott, Head of Business Development, Proactis

Achieving the best deal for your organisation – and being able to demonstrate it to stakeholders – depends on your ability to continually seek out and report on additional savings and benefits throughout the contract and supplier lifecycles. In fact, Supplier management is just as critical to your organisation’s financial health and competitive performance as your efforts to produce cost savings. But the search for added value doesn’t end with the completion of the procurement process.

For organisations managing long term contractual relationships, there can be a tendency to compartmentalise efforts to secure added value within the procurement process and to let the impetus to find savings and benefits slow down after the initial agreement is finalised.

In the long term, this can lead to missed opportunities for both buyers and suppliers to make their working relationships as efficient and mutually-rewarding as possible.

Any added value achieved in a procurement process can only be properly quantified, benchmarked and reported on, relative to previous or parallel examples. Ideally you’ll have a central repository of all your current and historical contract information, along with end-to-end management functionality that permits the continuous recording, extraction, and comparison of value-specific information. This enables reporting on added value at the conclusion of each procurement process and at intervals during the contract lifecycle.

Implementing a standard set of reporting metrics that take account of differing priorities across product and service areas – and factors such as inflation when conducting retrospective comparisons – allows you to signpost the specific types of added value that are most beneficial to the organisation in the long term and gives stakeholders and decision makers an insight into what can, and should, be achieved.

Depending on the nature of any given procurement function, added value can take the form of general cost savings, efficiencies made possible by new technology or processes, provision of certain products or services for free or at a discount, and any actions that come under the banner of social value.

Crucially, added value should be prioritised in post-award contract and supplier management and engagement activities, with regular appraisals and reports on whether or not benefits have been delivered and if any new possibilities have presented themselves. Waste can end up eradicating any savings that have been secured, so placing an emphasis on added value within more general efforts to minimise spend leakage can contribute to maximising additional benefits and overall efficiency in the long term.

Driving an automated system-based supplier management strategy across an organisation that will rationalise records and provide a platform for leveraging the cost and efficiency benefits of improved supplier relationship management could be the difference between success and failure – or even survival.

Using an automated system to categorise suppliers and classify goods and services means that everybody in the procurement chain can find what they need, based on the right engagements with their required categories. Automation also removes the need for manual supplier record maintenance - another daily cost that can be removed. Additionally, the Accounts department is liberated from the paper chase to focus on invoicing and revenue gathering.

It would be great to hear about how you are maximising added value through your processes - Please drop me a line. You can also learn more about driving maximum value from every supplier contract with Proactis Contract Management.