Category Archives: Best Practices

Enterprise Contract Management

Contract Management (CM), sometimes known as Contract Lifecycle Management (CLM), can be simply defined as the management of contracts made with customers, vendors, or employees. (Wikipedia) From procurement’s perspective, contract management is the process of tracking contracts to determine who you should be ordering from, when, and at what price;

and ensuring that your suppliers are adhering to the agreed upon terms. From a legal perspective, contract management is the process of ensuring that you are using standard terms, that risks are mitigated, and that contracts are in place for at least all key relationships. From a sales perspective, contract management is the process of dotting the i’s, crossing the t’s, and making sure payment terms and dates are clearly specified.

In my first post on contract management, I overviewed some basic features of a C(L)M system, including searchable centralized contract repository, collaborative capabilities, workflow capabilities, monitors, alerts, reporting, and template and clause-based contract creation capabilities. In my second post, I noted that Enterprise Contract (Lifecycle) Management (EC(L)M) offers advanced features beyond basic contract tracking, including collaborative capabilities, workflow capabilities, monitors, alerts, reporting, and template and clause-based contract creation capabilities.

However, I feel I’ve yet to capture the essence of Enterprise Contract Management. An Enterprise Contract (Lifecycle) Management solution is one that captures the holistic view of contract management from the enterprise perspective. It’s a solution that lets you do full Contract Information Management (CIM). Just like a true Supplier Information Management (SIM) solution lets you capture, manage, query, and create initiatives around your supplier information, a Contract Information Management (CIM) solution lets you capture, manage, query, and create initiatives around your contracts and all of the information that pertains to them.

With a true Enterprise Contract (Lifecycle) Management solution, you’re not only managing your contracts, but you’re managing the information that is within the contracts and related to the contracts. It’s being able to not only find the contract for the part you need, but share that information with your sourcing and procurement systems for automated compliance verification of invoices. It’s about being able to not only create standard terms and conditions in your contract templates but being able to annotate them with the reasons therefore. It’s about being able to determine not only what contracts are about to expire, but what risks you are open to with respect to your current contract base with respect to liability, supply stability, and corporate social responsibility. It’s about being able to drill down from a supplier contract into relevant supplier data and performance metrics to determine compliance. It’s about being able to drill down from your customer contracts to your delivery information to determine delivery statistics. It’s about being able to determine whether or not you are violating any labor regulations with respect to your temporary labor or out of compliance with International Labor Organization standards or Corporate Social Responsibility policies. Its about being able to truly manage your operations off of your contracts, and not just about being able to determine compliance and performance after the fact. After all, you can’t be defined by your contracts if you cannot effectively execute against them.

In our next post, we’ll examine Nextance (acquired by Versata Enterprises) one of the pioneers in the Enterprise Contract Management movement.

Avoiding Supply Chain Disasters

Last year, Supply Chain Digest documented “The 11 Greatest Supply Chain Disasters” of all time which contained a number of lessons on what not to do if you want a successful supply chain. Since it’s probably been a while since you scanned it, now would be a good time for a brief review. The lessons therein are valuable.

  • Don’t rely on unproven / untested technology or aggressive automation.The rate of technological advancement these days is rapid, but that’s not a guarantee the systems will be ready when you need them.

    (Foxmeyer, GM, WebVan, Adidas, Denver Airport)

  • Don’t upgrade all your core systems at once.Integration is usually more involved and time consuming than you think. The big-bang approach doesn’t work.
    (Foxmeyer, Hershey, Nike)
  • Don’t overestimate your capabilities.
    A sure way to lose customers is to over-promise and under-deliver – especially if the short-fall is significant.
    (Toys R Us.com)
  • Don’t forget the basics of good demand planning!
    Forecast, read signals, and repeat.
    (Cisco, Apple)
  • Don’t sacrifice quality for perceived lower costs.
    Lower costs don’t always exist, especially if your costs are low and quality best-in-class, relatively speaking.
    (Aris Isotoner)
  • Don’t count on an unlimited budget.
    Capital is always limited.
    (WebVan)

the doctor’s Guest Posts: The Year in Review

Over the past year, I’ve blogged a number of guest posts over on eSourcing Forum, including forty posts last summer as part of the weekend series. For new(er) readers to the blog, here is a list of all guest posts over on eSourcing Forum with direct links.

Weekend Series Posts on e-Sourcing Forum [WayBackMachine]

Purchasing Innovation I: An Introduction
Purchasing Innovation II: TRIZ
Purchasing Innovation III: The Verifier Approach
Purchasing Innovation IV: Innovation Continued
Purchasing Innovation V: Sourcing the New Organization
Purchasing Innovation VI: CrowdSourcing
Purchasing Innovation VII: The Road Ahead
Purchasing Innovation VIII: Transforming New Product Development
Purchasing Innovation IX: The Purchasing Evolution!

On Demand I: The Good
On Demand II: The Not-So-Bad
On Demand III: And the Coming Pretty …

Cost Reduction and Avoidance I: An Introduction
Cost Reduction and Avoidance II: Metrics
Cost Reduction and Avoidance III: Incentivize for Success!

Supply Risk Management I: An Introduction
Supply Risk Management II: Risks and the Need for Resilience
Supply Risk Management III: Managing Risk

Supplier Performance Management I: An Introduction
Supplier Performance Management II: The Road to Success
Supplier Performance Management III: Best Practices

Demand Driven Supply I: An Introduction
Demand Driven Supply II: Stages and Implications
Demand Driven Supply III: Challenges and Implementation

Center Led Procurement I: An Introduction
Center Led Procurement II: A Center of Excellence
Center Led Procurement III: Best Practices

Procurement Outsourcing I: Is it right for you?
Procurement Outsourcing II: Selecting a PSP
Procurement Outsourcing III: Getting the most out of your PSP

Optimization I: A Powerful Tool
Optimization II: Why it was Relegated to the Shadows
Optimization III: Why it’s time is finally here
Optimization IV: POE or BoB?

Six Sigma I: An Introduction
Six Sigma II: Innovative Quality
Six Sigma III: Value Based Strategic Sourcing

Weekend Series Wrap Up I: Process and Technology
Weekend Series Wrap Up II: Supply Chain Management
Weekend Series Wrap Up III: The Innovation Revolution

Miscellaneous Posts on e-Sourcing Forum [WayBackMachine]

* Lead Time Optimization: Groundbreaking New Technology or just Applied Total Value Management-based Decision Optimization in Disguise?
* Sustained Sourcing Success
* Are there any limits to procurement’s role?
* Outsourcing Gets Tough
* Design for Supply
* The Benefits of an End-to-End e-Sourcing Suite
* Accelerating Value with On-Demand: An Aberdeen Perspective
* Supplier Enablement Enables Savings

And just in case you missed it, here’s a link to the chaos-causing post on Emptoris’ optimization over on Spend Matters:
The Doc’s Perspective on Emptoris’ Optimization*

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Build a Better Worker

The April 23 (2007) issue of Canadian Business had a large section on the Best Workplaces of 2007 with the theme of How to Build a Better Worker that contained a number of useful tips for those of you working on your Talent Acquisition, Retention, and Development plans to make sure you don’t become another victim of The Talent Crunch.

The section contained a number of articles that focussed on how the best workplaces focus on fairness, promote respect, build credibility, instill pride, and cultivate camaraderie. Each of these articles contained a mini-tips section that is worth noting since you can use it as the foundations for your efforts.

In “Fairness First”, we are given five tips to foster fairness:

  • Manage ExpectationsAlso, under-promise and over-deliver.
  • Seek InputAnd integrate good suggestions into your initiatives.
  • Make Decisions TransparentDon’t sugar-coat bad news. They’re adults, after all.
  • Explain the Decision-Making ProcessBe transparent, honest, and regular.
  • Don’t Throw Money AroundWhen something’s wrong, diagnose it and fix it.

    Money alone won’t keep a good employee in a bad environment.

In “Well Done”, we are presented with five techniques to build respect:

  • Invest in EmployeesOffer training and development programs.
  • Acknowledge Good Work and Extra EffortFormally or informally, whatever works best.
  • Use a Variety of Techniques to Encourage InputRespond to input and implement good ideas.
  • Include Employees in Important DecisionsGive employees a chance to voice concerns.
  • Recognize that Employees have Personal LivesAllow some flexibility with schedules.

In “Talk the Talk”, we are provided four insights on creating credibility:

  • Keep Employees Informed Using Available ChannelsUse newsletters and video-conferences in addition to on-site meetings.
  • Do Your Job WellFocus on becoming and staying an expert.
  • Deliver on PromisesBuild a track record of matching words with actions and your employees will trust you.
  • Perform ConsistentlyIf you make a mistake, acknowledge it promptly, take responsibility, and focus on correcting the situation.

In “Proud out Loud”, we are notified of three methodologies for promoting pride:

  • Clarify the Organization’s Connection with CommunitySocial responsibility is more than just good public relations.
  • Clearly Explain Goals and Make Sure They are UnderstoodEveryone tends to pull in the same direction when they all know the same score.
  • Empower Employees to Make Decisions, Especially Regarding Customers Employees who feel they have the authority to make the “right decision”

    are happier, more productive, and more confident.

In “Work Buds”, we are granted three approaches for cultivating camaraderie:

  • Set Ground Rules and Encourage CreativityCelebrate special events and productivity.
  • Create a Hospitable WorkplaceA little fun goes a long way so encourage staff to socialize regularly.
  • Build a Sense of CommunityEmployees should be able to count on each other professionally and personally.

People Matter Most (and high-performing CPOs know it)

Given my temperament to tout the talent gap that is now increasing daily, I was happy to see the recent article from the European Leaders Network that stated “People Do Matter Most, Really”. The article, which referenced a recently completed research study, revealed, again to my content, that the best performing CPOs are concentrating their efforts on their people, capabilities, mindsets, and aspirations.

The study from McKinsey & Company and the  found that high performing firms had high performing purchasing departments and that what matters is the people in the purchasing department, how talented they are, how motivated they are, and how they interact with the wider organization. They found that purchasing departments that excel in these aspects of their activities achieve savings two and a half times higher than those that don’t. Furthermore, their positive influence branches out beyond the historical territory of PSM to include areas such as revenue, innovation opportunity generation, and the leadership of commercial change in the company. In more detail, high performing firms demonstrated annual purchasing savings of 3.5%, a 1.4% annual reduction in COGS, and an average EBITDA of 17.7%. Compare this to low performing firms that only achieved a savings of 0.6%, a 0.5% increase in COGS, an an average EBITDA margin of only 12.7%.

Most of the difference between high performers and low performers was encapsulated by three soft elements:

  • Talent and Capabilities of the PSM professionals
  • Mindsets and Aspirations of the PSM department
  • The degree to which the PSM function was aligned with, and able to contribute to, overall purchasing strategy

Furthermore, high performers were five times more likely to employ purchasing managers with analytical expertise and general management backgrounds and six times more likely to hire managers who have experience in another functional area.

Thus, the best way to achieve results is to hire talented and capable individuals with drive and aspiration who have broad experience from a functional and managerial perspective, align them to the overall business strategy, empower them and let them do their job.