Category Archives: contract management

If the Supplier Walks Away Whistling …

… simply put, you didn’t do a very good job. While the supplier should be walking away from the table with a hint of a smile on their face, as you want a positive relationship, if they’re whistling a jaunty tune and dancing to it, you got suckered. And these days, it’s happening all too often.

As per this recent post on the SCM blogs by James Baehr of Greybeard Advisors on how last minute bids and contract extensions can limit leverage, contracts are being benignly neglected. Procurement professionals are too busy issuing quick bids and placing orders based solely on price. As a result, the decision criteria is generally limited to price and Procurement finds itself with little, if any, room to negotiate for a better whatever. Furthermore, many buyers have taken to simply extending existing contracts, sometimes two or three times. This leaves money on the table and compromises leverage since the organization generally becomes more dependent on the supplier from whom they are no longer getting the best price. It’s not long before Procurement is stepping over dollar bills to pick-up pennies and the supper is walking away from the table with a jaunt in his step, whistling a happy tune …

Supply Chain Problems? Look North for a Solution!

I was thrilled with the results of the recent IACCM worldwide study that found “Canada is ‘Top Dog’ when it comes to World Trade”. It just confirms what I’ve known all along … there’s no one easier to work with than us canucks and no one more eager to help you solve your supply chain problems.

Furthermore, as Tim Cummins notes, with companies and public sector agencies worldwide increasingly concerned about reputation risk, it’s ethics, fairness, integrity that really matter. If there’s one thing us Canadians tend to have in spades (politicians excepted), it’s ethics, fairness, and integrity. The reality is that Canada is the sort of environment that can be trusted and where risks can be managed effectively. So come north. We’ll be glad to help you out!

A Hitchhiker’s Guide to e-Procurement: Catalogs & Contracts, Part II

Mostly Harmless, Part XX

Previous Post

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.

Common Challenges

  • 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?

Best Practices

  • 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.

Potential Benefits

  • 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

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A Hitchhiker’s Guide to e-Procurement: Catalogs & Contracts, Part I

Mostly Harmless, Part XIX

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A(n e-)catalog is an online catalog that lists products and services that a supplier is offering for sale. It can take many forms. It can be a simple flat file listing all products and services that the supplier sends to the buyer (who can then maintain it in their catalog system). It can be a database that can be queried. It can be the supplier’s website. It can be a punch-out marketplace. It can be an e-marketplace. It can be a virtual supplier network. As long as it lists item for sale and prices, it can be considered a catalog for the purposes of e-Procurement.

A contract is an agreement between two parties which, if it contains the elements of a valid legal agreement, is enforceable by law. In the procurement realm, a contract is usually between a buyer and a supplier for one or more services, under one or more conditions, at contracted rates. Contracts are generally managed by a contract management system, which may or may not be part of the e-Procurement system as contract management is a key part of the (e-)Sourcing cycle.

At the end of a procurement cycle, and before the next cycle begins, the catalogs and contracts need to be revisited to make sure they are still relevant and up to date. This is because, over the course of time, the following will happen:

  • the number of products purchased not in the catalog will increase

    over time, new needs will arise and replacements will have to be found for items no longer being manufactured

  • the number of items in the catalog no longer purchased will increase

    over time, needs will change and certain items will no longer be required

  • the number of items purchased against a contract will decrease

    as needs change and old items are no longer needed and new items not contracted for are required, the usefulness of contracts will decrease

  • contracts will expire

    and the pricing they contain will have to be renewed, revised, or removed from the system

The next post will outline some of the challenges associated with catalog and content management, some best practices, and some of the benefits that can be expected.

Next Post: Catalogs & Contracts, Part I

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Another Reason to Use Plain English in Your Contracts

In addition to the fact that you will have an entire state on your side, as Dick Locke points out, and the fact that not using plain english can land you in some dire consequences, as Tim Cummins points out over on “Commitment Matters”, there is the fact that obscure language increases the risk of failure. If no one understands what they are meant to be doing, a dispute is more likely. Contracts need to be clear, so write them in plain English.