In a recent Webcast, Spend Matters proposed the third way to enhance procurement’s impact on the organization’s bottom line is to go beyond the contracting basics.
Jason Busch highlighted a few advanced contracting philosophies including:
- Pursue an active compliance approach that leverages internal systems and marketplace information (e.g., commodity pricing trends, currency rates)
- Build your contract management system as a repository for the entire organization to rely on (procurement, legal, etc.)
- Rethink the notion of a contract
Busch offers these tips for to repurposing contracts in your organization:
- Position contracts as living documents designed to manage and govern the relationship instead of static pieces of paper to reference for re-sourcing or legal purposes
- Influence up front – introduce contract terms (e.g., indemnification) into the negotiation phase of a relationship; this can result in material savings and can foster a basis of mutual understanding and trust
- Think long-term – the ownership and transference of risk is often as important as the exchange of physical goods
Going beyond the contracting basics allows you to bridge the gap between procurement, sales and legal. In addition, effective contract management processes help provide an environment and process for collaborating and resolving formal disputes with suppliers.
Stay tuned for Part 4 when we will explore why you should invest in capabilities to support basic supplier management activities. In the meantime, you can download the Webcast slides here.