7 Ways to Optimize Your Procurement Processes Through Better Contract Management
Summary: Contract management can be optimized through effective, simplified, and regular communication with suppliers as well as through keeping documents safe and organized, knowing and tracking your KPIs and key dates, utilizing controlled processes, and quickly resolving issues. Outsourcing contract management is an effective solution for procurement process optimization.
Contract management is an often-overlooked and undervalued aspect of the procurement process that is mission critical to businesses that don’t just survive, but thrive. Poor contract management can lead to unnecessary risks as well as missed opportunities. Similarly, contract management that is not well-optimized can result in poor supplier relationships that result in sub-par performance. In fact, supplier relationships are a key aspect of contract management—arguably more important than the contracts themselves—although compliance, visibility, and controlled processes are strong competitors for that top priority spot.
For businesses looking to optimize their procurement and supply chain processes through better contract management, we’ve gathered seven tips below:
Nurture Your Suppliers Through Communication
Communication is key when it comes to supplier relationships. Provision of updates can go a long way towards keeping supplier relationships up to standards, because regular communication has a definite impact on motivation. This simple change can be the difference between simply meeting the requirements of the contract and going above and beyond to deliver excellent service. Because sourcing and contract negotiation and renegotiation can be costly endeavors in terms of both time and money, it is better to nurture an ongoing, symbiotic relationship with key suppliers where possible.
This sort of nurturing behavior builds rapport and can result in long-standing relationships that may also involve data-sharing, discounts, and many other perks. Set the stage from the very beginning in order to define how the relationship with your suppliers will proceed in the future.
Ease Communication With Well-Designed Invoices and Contract User Guides
Don’t risk costly errors through poorly-designed invoices or complex contracts that offer no insight or support for their contents. Instead, opt for simple to read invoices with no room for ambiguity nor wasted time for your suppliers. Especially if you’re nurturing long-standing contracts, the many hours saved for your suppliers can be a great source of relief and avoid risks associated with errors. On the other hand, complex or ill-formatted invoices can become a persistent source of frustration, and clerical error on this front can become a money- and time-sink for everyone involved.
On the same note, because contracts can be complex beasts of documents, it’s advisable to send over a basic user’s guide that explains, in easy-to-understand terms, relevant KPIs, SLAs, and all contract management provisions involved within. Ensuring everyone clearly understands their role within the expected relationship is key to good contract management and supplier relationships alike.
Utilize Controlled Processes
If your business uses pre-approved templates for contracts, it can be easy to let small changes—changes which can make a huge impact on the actual terms at hand—slip through the cracks undetected. By utilizing controlled processes, however, these small changes will quickly come to light, and contract managers can call attention to these items as well as seek necessary approvals.
This is one of our specialties at Premikati. When you opt-in to our full-suite contract management services, we can alert you to any changes to pre-approved language or formats, helping you better manage non-standard agreements.
Know Your KPIs
Just as it is relevant to clearly explain your KPIs to your suppliers so they can meet or exceed your expectations and fully understand their role in the relationship, it is just as relevant for you and other members of your business to know and understand your KPIs and monitor them closely. This will help with supplier communication as well as offer insight into the effectiveness of your supplier relationships as they pertain to your overarching business goals.
Keep Things Organized
A well-structured document and contract organization system is vital to success in the modern procurement world. You need to be able to both protect your documents as well as easily and quickly access any needed information for review. When you work with Premikati for contract management, we maintain a centralized repository of all your contracts that is not only secure, but also offers powerful search features so you have your most valuable information at your fingertips—always.
Continuous Monitoring And Key Dates
Don’t let contract renewals pass you by or keep suppliers on your roster who continuously underperform or underdeliver. Auto-renewals can hurt your business because you lose out on a perfect time to renegotiate as well as further develop your supplier relationships. Similarly, underperformers can be replaced sooner rather than later as long as you have insight into where these weak links exist.
Premikati offers complete visibility into the contract cycle and offers granular insight into your suppliers so you can quickly boost your ROI while reducing risk.
Solve Problems Early
Whether on the front of compliance or performance, early detection of problems can majorly impact your supply chain processes. Although errors and issues do arise, it is relevant to keep an eye out for any persistent issues that have the possibility to become trends. Maintain professionalism and patience in regards to performance, but swiftly and sternly stand your ground.
In regards to compliance, spotting issues early is vital to the health of your business, because compliance issues can be both costly and negatively-impactful to your reputation. In a time where reputation, sustainability, and social responsibility are being commoditized at an increasing rate, nixing compliance problems at the earliest sign of danger is more relevant to your business than ever before.
Outsourcing contract management is a highly-impactful way to reclaim time and money in your procurement operations. Premikati offers contract management services in five different tiers to grow with you and your business. With access to world-class technology like SAP Ariba and insight from leading experts in the field as well as the ability to mitigate risk during implementation and deployment, contract management through Premikati frees you and your employees to focus on what’s most important—deepening relationships with your suppliers, negotiating, and sourcing. Find out more about contract management through Premikati here.