Mostly Harmless, Part XX
The last post defined catalogs and contracts and discussed reasons why they will need to be revisited and revised on a regular basis. As promised, this post will address the associated challenges of catalog and contract maintenance, some associated best practices, and the benefits that could be expected from an appropriate e-Procurement solution.
- Unused Item/Contract Identification
Catalogs are continuously updated and procurement constantly negotiates and renegotiates contracts. However, how many of the items are ever bought and what percentage of the contracts are used for more than a short time?
- New Item Identification
What items were bought this month/quarter that were never bought before? Which are not associated with a contract or an approved catalog?
- Similar Item Identification
For those items which are not on contract, were there similar items on contract that would have sufficed? If not, were there at least similar items in approved catalogs that would have worked?
- Automatically Flag Items Not on Contract and Force Supervisory Review
The best way to reduce maverick spend is to prevent it from happening in the first place. Forcing a supervisor to review all purchases not on contract (above a certain dollar limit or for products / categories there are contracts for) can put a significant dent in contract spend.
- Automatically Flag Items Not in the Catalog and Force Procurement Review
Not everything will be on contract, but there’s no reason that the majority of goods and services that the organization needs to buy on a regular basis can not be in the catalog. Unless the item is brand new, it should be in the catalog if it is needed. Forcing Procurement review will minimize the purchase of off-catalog items where price, and associated spending levels, are unmonitored and where pricing could spiral out of control.
- Automatically Identify Items in Contracts and Catalogs that Have Not Been Purchased in the Last Month, Quarter, Year
New items need to be tracked and monitored as any new items bought in quantity on a regular basis are prime candidates for future contracts.
- Improved Contract Compliance / Reduced Maverick Spend
The automatic flagging of off-contract and off-catalog purchases for manual review and approval can greatly increase contract compliance while simultaneously reducing maverick spend.
- Easy Identification of Additional Savings Opportunities
The automatic identification and tracking off off-contract items and associated volumes can identify some of the best opportunities for future savings opportunities.
Once the catalogs and contracts are up to date, it is time to begin the cycle anew. The next post will move on to how to cost a solution.
Next Post: Costing a Solution