Contract and Supplier Management – 2014 priorities for procurement leaders (part 3)

What should CPOs and other senior procurement practitioners be focusing on in 2014? A difficult question because of course every organisation is different, and you really need to ensure that your priorities align with your wider functional, business unit and organisational strategies, goals and objectives. But we’ve got five suggestions that are likely to apply in the vast majority of organisations, we suspect. Here is the third.

3.  Contract and Supplier Management

Regular readers will know of my long standing interest in this topic. We have written a considerable amount of material about it over the last year or so, including our series on ‘Building the Business Case for Contract Management’ with BravoSolution.

But it’s worth stressing again why procurement should look hard at the role the function can and should play in contract management. The argument is not that procurement should take the lead on management for every major contract (although we featured one organisation here that is moving towards that model), but it is that procurement should look to have an overview and provide governance, guidance and capability across the major contacts picture.

And there are two reasons for doing that. One is defensive; we all know that even a brilliant piece of procurement work can be undone by poor contract management. And sadly, when that happens, the blame is often shifted back to the procurement phase. “It was a lousy contract / the wrong supplier was chosen by procurement” is the argument, not that the business didn’t manage it properly. So to ensure the success of good work done by procurement, we need to have some input into the post-contracting phase.

The more positive point is that effective contract management can help to both manage the risks inherent in virtually every contract, and exploit the opportunities. (Our work on the business case stresses those aspects of risk and opportunity). And strong contract management is also, we suggest, an essential pre-cursor to SRM (supplier relationship management) activity.

If procurement can’t take the lead in every case, what can it do? We’ve identified five key areas where procurement can take the lead; Governance and programme management; Defining best practices and processes;  Developing appropriate organizational skills and capabilities; Driving initial and constant visibility; and Tools and technology.

So think about those as a template for the procurement role; and our three ‘take-aways’ for practitioners to consider are:

If you don‘t have a grasp of what contracts are in place, consider a contract discovery process / tool such as the Seal Software.

Define what role procurement can play in contract management, and look to get business buy-in to that approach.

Ongoing contract management can also be supported better with the right tools in place – BravoSolution, Iasta, Emptoris, Zycus all have decent options -  but the appropriately skilled resources are also key.

Comments

  • David Saint:

    I truly believe procurement should take the lead in contract management. Whilst it is not possible to manage every one there is a case were strategic and critical contracts should be managed by procurement. I personally see it as part of a holistic post award management approach including SRM and is about delivering the value from the category management and sourcing processes.

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