The key to transitioning from a
Reactive Purchasing Department to a Strategic Procurement Organization
is a pro-active approach to contracting
management.
The goals of a world-class supply management organization require that
more long-term agreements be established with a fewer number of key suppliers.
This is a much-ignored aspect of supply management performance, however,
as illustrated by the following quotations: “The average Fortune
1000 company has between 20,000 and 40,000 active contracts, up 20% in
the last 5 years” (Institute for Supply Management)
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“Contract management is where finance was 30 years ago” (Oracle)
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“ It is estimated that 10% of contracts across all industry sectors
are lost. Many companies say they regard this as inevitable, and that
dealing with the consequences is simply a cost of doing business. They
are wrong. This is a cost of poor business.” (PriceWaterhouseCoopers)
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“Contracts are not reviewed properly – although at least
one in four represents a potential opportunity to reduce costs” (PriceWaterhouseCoopers)
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“Organizations which don’t manage their contracts effectively
will be at a tremendous competitive disadvantage” (The International
Association of Contracts & Commercial Managers – IACCM)
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“The scariest thing is that nobody knows exactly how much they
lose with their manual contract management practices” (MEMBA)
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“ERP solutions only cover 20% - 30% of the needs of most organizations.
Time to manage those contracts!” (Goldman Sachs)
“The past decade has seen a revolution in the role of contracts – transforming
them from purely legal necessities for protecting against worst-case
outcomes, into tools for optimizing ongoing business relationships. The
way they are managed must be transformed too”. (PriceWaterhouseCoopers)
Strategic Procurement Solutions' partners are skilled in helping organizations
transition to a pro-active approach to contracting management, through
a combination of the following services:
Contract Inventory Assessment:
We will perform a thorough analysis of a client’s contract
inventory, with quantified assessment of Legal Exposure, Required
Activity Ratio, Term Administration, Industry
Fit,
Expiration Exposure, Standardization, Expense Base Capture, etc.
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Agreement Development Process: We
will map a client’s contract
development process against "best practices" to identify optimization
opportunities, legal support fee reductions, & other areas of
improvement.
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Pro-Forma Agreements: Critical
to success for today’s procurement
organization is the possession of a concise set of pro-forma contracts
to be used as a basis for negotiations. We will work with clients and
their legal teams to develop concise, industry-acceptable, and comprehensive
set of "pro-forma" contract documents. We will also help
clients develop an optimum RFP document for use in a hard-copy
or on-line environment.
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Administration Techniques: Typical
procurement departments lose amazing amounts of value through inattention…too many agreements expiring
each year, agreements expiring at the same time, "evergreen" roll-overs
with uncontrolled escalations, terminations without purchasing involvement,
etc. We apply common-sense solutions to each client’s inventory.
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