Archive for January, 2013

Collaboration in SCM

January 16, 2013

Over the years, many technologies have evolved to support both asynchronous and real-time collaboration. Most of the older technologies, such as teleconferencing, video conferencing, e-mail, etc., have major limitations that lower their value in product development environments. The newer and still-evolving technologies that enable PLM allow the management of product information and the processes that are used to create, configure, and use the information in a manner never previously thought of before.
We talk a lot about collaboration, but do we really understand what it means? In general, collaboration is an iterative process where multiple people work together toward a common goal. Methods of working collaboratively have existed as long as humans have joined together to accomplish tasks that could be done better by a team than an individual. Early man is probably the best example of collaboration when hunting for food for the village or the tribe.

There are two modes of collaboration: synchronous and asynchronous. Users working in an asynchronous manner carry out their assigned tasks and then forward the data to the next person. This way of working is serial in nature and only allows users to participate one at a time. Communication among collaborators is normally carried out using telephone or e-mail. Effective collaboration requires an area of storage for information from which product definition data can be shared with all those that require it. This shared area is commonly referred to as a data vault. Flow control and task execution is performed in an asynchronous way using workflow and project management tools. These tools allow data to be routed to users and progress to be monitored.

Synchronous or real-time collaboration enables users to view, work with 2D (e.g., specifications, drawings, documents, etc.) and 3D data (e.g., mechanical CAD models), and carry out interactive communications with each other in real-time. In addition, PLM-enabled collaborative solutions often support the ability to view, rotate, add notes and annotation pointers, and some also offer functionality to change the 3D design model data. This provides the same communication effectiveness as having all participants in the same room, at the same time, looking at the same data.
The following describes some of the processes commonly supported by PLM-enabled collaborative technologies.

Supply Chain Management—The move to a partnership-oriented supply chain means that suppliers, partners, sub-contractors, and customers are all involved in product definition. For companies to embrace the true potential of the distributed supply chain, collaborative tools can be used to manage data and processes across a distributed environment.

Sales and Bidding—Opportunities exist for sales, engineering, purchasing, and manufacturing to engage in collaborative sessions where product options, alternatives, and concepts are reviewed by each discipline at the same time. This is faster, more efficient, and can produce more accurate and cost-effective bids.

Maintenance and Support—The application of collaborative tools in maintenance and support activities is gaining acceptance in a number of different sectors such as aerospace and defense, automotive, process, and machine tools. For example, animation and simulation tools are being used to demonstrate how products are operated and maintained.

Change Management and Design Review—Adopting a different design review process, where project teams join a shared collaborative review session can result in significant benefits as potential conflicts and errors can be identified early in the product development lifecycle.

Senior Managers in the business world understand economic cycles are a known fact of life. The key to success is the way managers and organizations adapt to these cycles. Since they are a fact of life, we know that we can’t just ignore downturns and hope for a better day. So instead, those that are successful learn how to become more efficient while still ensuring that they deliver the best value to the markets they serve (i.e., making available the right product, at the right price, to the right market, at the right time, at the right quality, (The 5 Rights!)).

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Business Process Re Engineering

January 8, 2013

Business process reengineering (often referred to by the acronym BPR) is the main way in which organizations become more efficient and modernize. Business process reengineering transforms an organization in ways that directly affect performance.

The Impact Of BPR On Organizational Performance
The two cornerstones of any organization are the people and the processes. If individuals are motivated and working hard, yet the business processes are cumbersome and non-essential activities remain, organizational performance will be poor. Business Process Reengineering is the key to transforming how people work. What appear to be minor changes in processes can have dramatic effects on cash flow, service delivery and customer satisfaction. Even the act of documenting business processes alone will typically improve organizational efficiency by 10%.

How To Implement A BPR Project
The best way to map and improve the organization’s procedures is to take a top down approach, and not undertake a project in isolation. That means:
• Starting with mission statements that define the purpose of the organization and describe what sets it apart from others in its sector or industry.
• Producing vision statements which define where the organization is going, to provide a clear picture of the desired future position.
• Build these into a clear business strategy thereby deriving the project objectives.
• Defining behaviors that will enable the organization to achieve its’ aims.
• Producing key performance measures to track progress.
• Relating efficiency improvements to the culture of the organization
• Identifying initiatives that will improve performance.
Once these building blocks are in place, the BPR exercise can begin.

Tools To Support BPR
When a BPR project is undertaken across the organization, it can require managing a massive amount of information about the processes, data and systems. If you don’t have an excellent tool to support BPR, the management of this information can become an impossible task. The use of a good BPR/documentation tool is vital in any BPR project.
The types of attributes you should look for in BPR software are:
• Graphical interface for fast documentation
• “Object oriented” technology, so that changes to data (eg: job titles) only need to be made in one place, and the change automatically appears throughout all the organization’s procedures and documentation.
• Drag and drop facility so you can easily relate organizational and data objects to each step in the process
• Customizable meta data fields, so that you can include information relating to your industry, business sector or organization in your documentation
• Analysis, such as swim-lanes to show visually how responsibilities in a process are transferred between different roles, or where data items or computer applications are used.
• Support for Value Stream mapping.
• CRUD or RACI reports, to provide evidence for process improvement.
• The ability to assess the processes against agreed international standards
• Simulation software to support ‘what-if’ analyses during the design phase of the project to develop LEAN processes
• The production of word documents or web site versions of the procedures at the touch of a single button, so that the information can be easily maintained and updated.

Conclusion
To be successful, business process reengineering projects need to be top down, taking in the complete organization, and the full end to end processes. It needs to be supported by tools that make processes easy to track and analyze. If you would like help with your BPR project, please Manage to Supply
• Business process reengineering is a huge step for any company, though one that can bring equally significant rewards when properly implemented. Be sure to think your decision through thoroughly and proceed only after you’ve done sufficient research.
• Should you decide to act as your own business process engineer, realize that you’ll need adequate BPR training and excellent business process engineering software to successfully pull it off. You’ll need to develop the skills necessary for creating a business process map redesign that not only meets your company’s unique needs, but also adequately addresses your prior business process problems.

Best Practices for performance metrics improvement

January 5, 2013

The Supply Chain in many organisations has become longer over time and contains more partners than ever before.
These longer supply chains are the result of vertical integration strategies yielding to first outsourcing and then off-shoring. In addition, organisations continue to add more products, more suppliers and more plants or distribution centres. They have also evolved their customer and product mixes, implemented new postponement or replenishment strategies, or simply scaled in volume, leading to a significant change in the structure of their supply chains.
As the assumptions used in the initial supply chain model change over time, its model and processes are not likely to keep pace with the changes. What was once a smooth and efficient supply chain can begin to show weak performance metrics! As organisations seek to improve their supply chain metrics, the key question is what best practices they should adopt?
Based upon experience from a number of different industries, here is a list of ten best practices that an organisation could or should implement as it seeks to improve its performance metrics.
1. Create a consensus demand plan: An organisation can get consensus on market requirements and business assumptions by incorporating new product introductions, product retirement, upcoming promotions, financial projections, investor commitments and sales forecasts into the demand planning process, and creating a consensus plan around it. Without building consensus, everyone has a different perspective of customer demand and it becomes difficult to Synchronise Demand and Supply.
2. Ensure supply demand synchronisation: By using techniques such as Sales & Operations Planning (S&OP), as well as creating a supply plan that maps to demand while also incorporating key constraints, a company can ensure that it will be able to meet its delivery commitments without incurring expediting costs or higher inventory. Such capability not only reduces costs, but increases customer loyalty.
3. Streamline supplier interactions: By providing suppliers ongoing visibility into their forecast and consumption plans, as well as current inventory status and planned receipts, manufacturers can get their suppliers to improve replenishment lead time and become more responsive to their changing needs. It also allows them to implement programs such as Vendor-Managed Inventory (VMI), cut costs through reduction in inventory and safety stock, reduction in overtimes or expediting costs.
4. Get visibility into supply chain events: Traditional supply chains are evolving into a worldwide network of suppliers and manufacturing or distribution facilities. Such an environment requires stakeholders to share any shipment or material information such as plans, current status or exceptions with each other in a timely manner in order to improve overall supply chain performance. Without the ability to provide such levels of visibility to each other, each stakeholder ends up continuously reacting to unplanned surprises with limited time to act, not to mention carrying extra inventory to compensate for such surprises. Visibility into shipments and material-related information promotes faster decision-making within the supply chain and enables each stakeholder to proactively respond to issues. Supply Chain Event Management (SCEM) addresses these requirements.
5. Automate trade compliance: As organisations grow in scale through new products and expanded geographical markets, or setting up plants in other countries, or turning to offshore suppliers, manual methods of managing the export and import compliance process become exponentially more complex and time-consuming. Even significant increases in headcount may not resolve the issues. Streamlining the export and import management process brings benefits such as significant cost savings, improved productivity, fewer shipment delays and reduced risk of penalties and fines due to non-compliance.
6. Rationalise the supply base: By reducing the number of suppliers, procurement managers can take spending on a category that is currently scattered among multiple suppliers and award that volume of spending to a smaller number of suppliers to gain volume discounts. Rationalising the supply base also reduces complexity associated with new part introduction and simplifies supply collaboration.
7. Integrate engineering and sourcing into supply chain management: New product introduction (NPI) and sourcing are key elements of effective supply chain management. Without expertly incorporating NPI into the supply chain planning process, a manufacturer runs the risk of inventory write-offs or shortages of critical components. Similarly, the sourcing process should incorporate requirements such as ability to deliver in the right replenishment model, responsiveness and flexibility to react to sudden changes in business needs.
8. Continuously measure key performance metrics: One best practice is getting visibility into key supply chain performance metrics on an ongoing basis and using that information to continuously improve the supply chain. SAP’s supply chain performance management solution can assist in closing the loop for its customers.
9. Focus on time and inventory: While one can focus on improving multiple aspects of the supply chain, the greatest impact can be had by focusing on continuously improving on two fronts: increasing the velocity of process and information flow and focusing on activities and actions that can reduce inventory within the system.
10. Deploy an integrated solution: When the supply chain capabilities of ERP systems were not as mature as they are today, best-of-breed solutions were the preferred approach. However using such systems created information integration issues. Today, It is recommended that companies evaluate supply chain systems from their ERP vendors before looking at other options.

Adoption of sourcing technology – ease of use.

January 3, 2013

Organisations spend millions of dollars on technology implementations. It has been seen that many projects fail within one year of implementation. In a recently issued study report from the World Economic Forum 2010-2011, Sweden and Singapore continue to dominate the rankings, whereas Malaysia ranks 28th and Oman stands only 41st in terms of technological savvy nations. One of the reasons for this could be lack of adoption of new technologies within the organisation.

Employees using a new software system exhibit steep learning curves and resistance to change which is evident from the large percentage of organisations feeling their ability to deal with change being poor. Most of the time this failure can be attributed to a lack of communication between the decision maker (which in our case, would be the CPO or the VP procurement) and the end user(buying manager, buyers etc.). The point being, that such an environment is not conducive for effective software implementation.

Procurement technology solutions have also not been immune to adoption failure. Let’s take a look at a case study.

An $11 billion organisation had in place an existing eSourcing solution from a major solution provider. The investment for the same was close to $ 100,000 and there were 100 user licences which had been purchased. After a Post implementation review it was observed that there existed only 5 active users of the application whilst 95% remained inactive indicating lack of adoption amongst the users. More importantly, what was not considered was the comfort level of the suppliers who would be an important end user of the sourcing solution. Suppliers would not respond to RFIs created within the tool citing it to be too complex and would send in quotes through excel documents making evaluation almost impossible and tedious.

This post will explore the major challenges involved in adoption and how an organisation can use four strategies to overcome the adoption challenges and ensure acceptance of the eSourcing solution by the end users.

Challenges Faced!

Before I discuss the ways to increase procurement technology adoption within organisations, let us look into what are the major challenges that organisations face with respect to procurement technology adoption.

The first and foremost challenge is to deal with the resistance to change. Even when organisational members recognise that a specific change would be beneficial, they often fall prey to the gap between knowing something and actually doing it.

The second reason can be attributed to the complexity of technology which detracts the end user since it requires acquiring new technological knowledge and skills. Complex features may sound great in product demonstrations and data sheets but become a bane to adoption at the ground level.

The third reason could be a lack of visibility into benefits of the software post implementation. It’s important to note here that a benefit needs to be expressed in the parlance of the end user. The end user needs to see how the technology will benefit him in his job. In short what is the take away for him?

So how does one overcome these challenges? Here I would like to draw your attention to what I want to call the “For Ease Strategies” of efficient user adoption. These are – Ease of Use, ease of user Involvement during evaluation, ease of Training and Adoption and finally ease of Metrics & Incentives. Let us look into each of these “ease strategies” and the role they play in overcoming the challenges.

Overcoming challenges to procurement technology adoption is the key to ensure that an organisation reaps the benefits from their implementation. In this section I will discuss the importance of having the right strategy to overcome the adoption challenges.

Strategy 1. Ease of Use

As discussed earlier, complexity of technology was one of the major reasons for lack of adoption. This is where having a technology which is easy to use goes a long way in fostering acceptance among the end users. Let’s consider a very simple example here.
Consider an i-Phone or i-Pad as an innovation which although loaded with several sophisticated features is extremely easy to use for the end users leading to quick and higher adoption levels. Ease of use of course should not be at the cost of functionality.

Organisations should work on achieving a balance between satisfying all key core requirements and enhancing the user experience. While talking of ease of use, it is of utmost importance to speak from the perspective of the end users. Technology vendors and decision makers often confuse what is naturally easy for them as ease of use when discussing software.

Organisations must ensure that the new technology that they are planning to implement shall be easy to use not just for the stakeholders but the eventual users of the solution who will use it day in and day out. Technology must make things simpler for the end user.

Features need to be mapped with the needs within the organisation rather than looking at solutions which have the maximum number of features which don’t really satisfy the inherent needs in the process.

Strategy 2. User involvement

User involvement goes a long way in overcoming adoption challenges. User involvement can be accomplished by involving the end user in the initial stages of the software selection process. Users can be involved in the product demonstration process, which would help in conveying the benefits of the product to the end user for e.g. Using the ‘drag & drop’ feature within e-sourcing can be used to set up complex events in just minutes ensuring 100% category coverage. Demonstrating this to an end user will help convince him/her to create all events within the solution.

This process can now be followed up by a pilot process involving the end user. This would further convince the end user regarding the benefits by understanding how a particular feature directly benefits him in his work process.

Once the user receives a hands-on demonstration of the tool’s capabilities, make sure to have a feedback about the experience. Such an activity would ensure greater buy-in from the end user and also considerably reduce the objections arising post implementation.

Strategy 3. Training

Training should be arranged both pre and post implementation.. The training can be conducted by a variety of means . Combining periodic on-site training with regular feature level training provided online in the form of user sessions, webinars etc. is the most effective way of achieving user adoption goals. It is recommended to have the vendors / Suppliers involved at every stage of training to ensure a constant communication between the end user and the trainer.

Ideally there should be a training council formed comprising of members from both the vendor / Supplier and organisation. Once the training is conducted organisations can also look at conducting product knowledge tests and quizzes. This has dual benefits;

1. Makes the end user more responsible
2. Helps in judging the effectiveness of the training sessions

Strategy 4.

Once the technology has been implemented, top management needs to sit with the end user and decide on how to measure the performance of the end user. Including the end user in setting performance goals inculcates a lot of responsibility and accountability among the end users. Organisations must ensure setting fair, consistent and rigid goals which are transparent in every sense. I offer an example of how this could be accomplished.

Example 1. Consider an organisation who has just implemented an eSourcing solution. Suppose the organisation has 50 sourcing events scheduled to take place in the year. One of the check points could be to see how many of these sourcing events were channeled through the eSourcing platform. With deliberation organisations can set a goal of 80% of the sourcing events to be conducted through the e-sourcing platform.

Or another example

Example 2. If an organisation enters into say 100 contracts in a year, one of the objectives would be to have say 90% of contracts under the contract management system.

Once the objectives have been set by deliberation with the end user, the next logical step could be to link the incentives of the users with the objectives set. A simple incentive can be percentage sharing of the savings achieved from implementation of the solution. These can be benchmarked with similar numbers before the software was implemented to derive the results or direct benefits from the solution implementation.

Managing Change.

A learning orientation is critical during implementation stages. This brings us to the next point which is concerned with managing change. In order to successfully manage the change process, I recommend the following four steps:-

Inform

Brief the end user about the new technology and involve the end user in the evaluation stages.

Educate

Educate the end user about the product in the form of product training, workshops (video, onsite etc), webinars etc.

Monitor

Devise mutually accepted metrics for measuring the performance of the end user post implementation.

Reward

Linking the objectives with incentives, with disbursement of incentives related to the objective met.

Conclusion

Companies must do away with persuasion and edict as part of technology implementation and adoption processes since both involve little or no user input in decisions regarding implementation and adoption. Also, change management is the key to ensure buy-ins from the various related stakeholders thus ensuring benefits from the technology implementations.

The butterfly effect on enterprise data within SCM

January 2, 2013

After doing a couple of projects where master data was a critical element but unfortunately nothing was done to correct it, I thought that I would reintroduce the post on the Butterfly effect in Master Data. All to often the master data is completely forgotten in projects and in the end costs money to rectify and could lead the software to fail after go live. So to learn more about the butterfly effect and it’s impact on master data read on!

The term “butterfly effect” refers to the way a minor event – like the movement of a butterfly’s wing – can have a major impact on a complex system – like the weather. The movement of the butterfly wing represents a small change in the initial condition of the system, but it starts a chain of events: moving pollen through the air, which causes a gazelle to sneeze, which triggers a stampede of gazelles, which raises a cloud of dust, which partially blocks the sun, which alters the atmospheric temperature, which ultimately alters the path of a tornado on the other side of the world.

Enterprise data is equally susceptible to the butterfly effect. When poor quality data enters the complex system of enterprise data, even a small error – the transposed letters in a street address or part number – can lead to revenue loss, process inefficiency and failure to comply with industry and government regulations. Organisations depend on the movement and sharing of data throughout the organisation, so the impact of data quality errors are costly and far reaching. Data issues often begin with a tiny mistake in one part of the organisation, but the butterfly effect can produce disastrous results.

An ERP or supply chain system focuses on parts, descriptions and inventory data. Since government agencies don’t control the way supply chain and ERP data is defined, you may not have an idea about how the data should look in an ideal state, but it should provide an accurate depiction of the physical warehouse or just-in-time supply chain system. You need to know what is in stock, when it can be supplied and how much it costs.
Holding just the right amount of inventory is crucial to optimising costs. After all, inventory costs are incurred every hour of every day in areas including warehouse storage, heat and electricity, staffing, product decay and obsolescence. With this in mind, consider the impact of a transposed letter in an ERP system. Someone enters part number XL- 56YJM instead of LX-56YJM. Until the error is discovered and corrected, you may hold duplicate parts in inventory or not be aware of parts carrying the slightly different SKU because of the transposed letter.

You also want to take advantage of volume discounts. If the data is unstructured, making it difficult to understand global buy patterns, the company may miss out when negotiating with the vendor.

Because there is no standard format for ERP data, few of the steps for fixing the data are done for you ahead of time. It is critical to establish a methodology for data profiling in order to understand issues and challenges. Since there are few governing bodies for ERP and supply chain data, the corporation and its partners must often come up with an agreed-upon standard, with input from users of the data to understand context, how it’s used, and the most desired representation.

If you have clean data in your supply chain, you can achieve some tangible benefits. First, the company will have a clear picture about delivery times on orders because of a completely transparent supply chain. Next, you will avoid unnecessary warehouse costs by holding the right amount of inventory in stock. Finally, you will be able to see all the buying patterns and use that information when negotiating supply contracts.

Driving collaboration through Contracts Management

January 2, 2013

The contracting process has always been a major point of discontent between procurement and legal functions within an organisation. The goals of the legal department to achieve control and compliance often clash with procurement’s objectives to build collaborative relationships with suppliers. This has become extremely pronounced now, that procurement feels that it needs to become a strategic value contributor pushing the business performance of the organisation rather than simply focusing on getting the lowest price. A collaborative culture of contract authoring can be built using the right contract management technology, which can bring together the two functions and drive compliance and control while at the same time foster better supplier relationships, which in turn can deliver real savings with minimal risks to the supply chain. This paper takes an in-depth look at the reasons for the collaboration challenges between procurement and legal departments and the technology and process initiatives that can bridge these gaps.

Procurement and Legal at loggerheads

A recent study by IACCM throws up several results that suggest that the relationship between procurement and legal teams are less than cordial in most organisations. Nearly 70% of the study respondents felt that the relationship between the two functions needed to improve. It is not surprising that the primary reason for discontent between the two functions was the contracting process. The biggest fear that most legal departments have is the whether the procurement function can actually ensure that the contracting terms
will be adhered to post contract awarding. This may seem like a paradoxical situation. If the procurement function gets into contracts with suppliers in the first place, why would it not want to adhere to them?

There are several factors that result in maverick or off contract purchases. A majority of these occasions are primarily ad-hoc purchases, where buyers resort to buying from whichever supplier is available quickest and at the most opportune time. More maverick spending means higher total procurement costs and fewer on-time orders which is clearly not a recipe for achieving procurement efficiency. A research by APQC says that organisations with 16% maverick spend spend on an average nearly $17,000 more per procurement FTE as compared to organisations with maverick spend of 1%.. In fact even the on time delivery percentages for such organisations was nearly 6% lower than their peers. It is therefore definitely not surprising that legal teams have their doubts over the correct execution of contracts by the purchasing / procurement department. In the IACCM report referred to above governance of contracts post award and the ability of procurement to effectively manage contracts was cited by nearly 60% of the participants as a critical factor causing high level tension between procurement and legal functions.

Conflicting approaches with a common need for change

Analysing from an organisational perspective Legal and Procurement teams approach the contracting process from two very different angles. Legal teams look at contracts as tools to streamline processes and establish strict controls while procurement looks at it as the first step in establishing cost savings and supplier relationships. With the economy becoming vastly different – with supply chains becoming growingly interconnected and vast- these disparate perspectives of the contracting process have brought their own unique challenges for both the departments. Legal teams now have to handle a much larger number of contracts in multiple languages and with a wide variety of, at times very specific and unique contracting terms and conditions. The increased workload and the looming threat of non-compliance to several contracts makes it imperative for legal teams to manage contracts more efficiently and leverage the right automation to maintain control. Standardising the contract creation process is often made the primary goal.
Procurement, no longer a tactical function, needs to develop long term strategic relationships with suppliers and add more value to the company’s bottom line. This needs contracting to be more flexible to generate additional savings and contribute in value creation. This may include insertion of necessary clauses that help them take advantage of dynamic marketing conditions – say for example escalation and de-escalation clauses for highly volatile commodities. This of course becomes the first bone of contention between the two functions as one aims to standardise while the other needs more flexibility. The pressure between the two teams is to create a contracting process that not only helps procurement generate savings and account for frequent renegotiation but also helps legal enforce compliance in contract execution and get better outcomes out of the contract resulting in sustainable savings.

An often neglected area of discord between the two teams is the time taken to create contracts. Procurement with its need to take advantages of prevalent market conditions and the supplier’s disposition to discounts at the time of negotiation needs the contract creation and execution cycles to be as short as possible. Legal teams on the other hand have a primary responsibility to ensure every contract is free of risk to the organisation and hence may take frustratingly long periods to go through minute details in all clauses within the contract. This may result in procurement missing out on additional savings based on time discounts or market variations. Automated contract authoring technology that provides standard clauses and templates is the the answer to not only reducing the time for contract creation and approval but also ensuring that risk mitigation is easy.

The need of the hour

The need of the hour is for the contracting process to enable collaboration between the procurement and legal functions rather than be a cause for dissent. At a strategic level there is a growing need to redefine the relationship between the two functions. The contracting process needs to ensure

Real and incremental savings

Improved contract outcomes

Better process streamlining and compliance

Mitigation of risks while taking advantage of dynamic market conditions and better
renegotiation

Proactive and collaborative management of change

Powerful analytics that deliver strategic value

Getting the right solution

All this is easier said than done. It is imperative that a process is created within the organisation that makes contract authoring, creation and management simpler. Although getting buy in from employees in the procurement and legal teams is important, the first step to have an effective process in place to invest in the right technology. A contract management solution should be able to foster collaboration by providing clause libraries and standard contract templates that ensure contracts don’t miss out on any mandatory clauses and terms. This will help in reducing the time for legal review as well as ensuring minimum exposure to risk. Although it should provide a sufficient collection of standardised clauses and templates the contract management solution should also have customisable workflows that permit the insertion of clauses that help organisations take advantage of market conditions and supplier discounts. There should always be room for renegotiation especially for volatile commodities. This can be achieved by putting clauses like escalation/de-escalation clauses or conditions on contract renewal based on prevalent commodity market prices that insure the organisation against volatility risks

Technology as an enabler:

An ideal solution to this collaboration conundrum would be a solution that streamlines all the steps of the contract management process

A typical contract management process can be divided into three major stages.

Contract Authoring

The solution should be able to create contracts with pre-defined workflows that not only incorporate feedback from all relevant stakeholders during the contract creation process but also take care of exceptions and approvals. The authoring process can be made easier and more compliant by having a central template repository that contains all pre-defined clauses. Legal teams should have access to this repository to continuously update the latest clauses and ensure that the organisation has no unforeseen risk in getting into the contract. All contracts should be housed in a central repository where they can be tracked and managed. The contracts should also be easily available through simple search processes to ensure easy access to all necessary stakeholders.

Contract Negotiation

Contracts should contain well-defined service level agreements (SLA), which are transparent to suppliers. The contracts should be the basis of all supplier performance measurement and should be the guiding factor to defining the KPIs for all supplier performance management processes. Alerts should be configurable within the contract management system for tracking compliance both for users within the organisation as well as supplier performance to contracted terms. Besides compliance alerts the solutions should also have alerts for contract renewals so that evergreen contracts don’t get renewed repeatedly without the scope of renegotiation-something legal teams always have on their cross hairs. Contracting solutions should be able to match contracts with spending data to help track any maverick spend and in turn provide potential opportunities to save. Analytics should also be provided on supplier performance in term of discounts adhered to and quality.

Contract Sign Off’s

Electronic signatures have to be mandatory for any contract management solution implemented and should be enabled during various stages of the contract creation and approval process.

Reaping the desired results

An effective contract management process if setup as mentioned above can result in the following benefits

Reaping the desired results
An effective contract management process if setup as mentioned above can result in the following benefits

Risk mitigation due to increased visibility into existing contracts

Improved contracting process and reduction in overall cycle time

Adherence to regulatory compliance requirements due to increased tracking of contract compliance

Increased compliance to terms and conditions

Spend compliance ensuring sustained savings. In fact a recent survey of nearly 600 procurement professionals suggested that doubling contract compliance leads to a near 600% increase in savings generated through spend management activities

Better collaboration due to standardised processes and agreed SLA’s between Legal and Procurement as well as procurement and suppliers

In closing an effective contract management solution can help organisations generate sustained savings and build effective supplier relationships. But one of the major benefits of implementing a robust contracting solution-that both stores and authors contracts-is increased collaboration between procurement and legal working to the benefit of both. Procurement is able to drive sustainable savings and meet its goal of being a strategic value contributor to the organisation while legal teams are able to mitigate risks to the organisation and ensure control and compliance.