This is the third in a series of four posts for Procurement teams.
The three main goals of modern procurement teams and how to achieve them
Every revenue stream and business decision—suppliers, purchasing, mergers and acquisitions, strategic partnerships, to name a few—can benefit from streamlining and simplifying contracting processes.
Contracts are ground zero for setting expectations— where you assign risk; making them key to Procurement’s ability to manage risk now and in the future, and avoiding costly fines. When working with suppliers each side must assess what level of risk they are comfortable carrying based on the appropriate factors—precedent, probability, impact, mitigation resources, necessity, and so on. During this stage teams should be collaborating with Legal, not circumventing, to ensure when a contract is drafted, risks are accepted that are fair and manageable.
Modern contract management platforms drive more visibility, performance, and compliance throughout the contract process, and provide a significant opportunity for Procurement teams to capitalize on time and resources, as well as outmaneuver volatile market conditions and mitigate or eliminate risk. Templates make sure standard pricing, service-level agreements (SLA), clauses, and terms and conditions are always included. Approval workflows automatically obtain the right signatures at the right time enabling speed without worry of risk.
There are three big ways Procurement delivers value: savings, strategic relationships, and efficiency. Cost reduction initiatives that rely solely on a price reduction from contracts due to squeezing suppliers thwart any ability to capture additional savings throughout the value chain. This is also important as Procurement’s focus dissolves from one of a single unit cost reduction to one of total cost of ownership, meaning the “set-it-and-forget-it” method will need to change, and ongoing contract management is the answer. What happens after the contract is signed? Did the supplier deliver? Were savings and value from the contract actually realized? Instead of short-sighted quick wins, make cost savings repeatable and opt for longer-term transformational opportunities. With a CLM platform Procurement gains a comprehensive view of all contracts and can more easily identify these types of opportunities. Procurement can gain more buying and negotiating power, able to deliver better terms, substantial savings, and more value in the long run, while becoming more strategic in the process. Bringing contract management under Procurement’s purview, with the implementation of CLM platforms, makes planning everything based on the past a thing of the past. Now, everything is planned in the future—because the future already exists in your contracts.
Strategic partnerships result in key competitive advantages—ensured access to supplies, lower total cost, streamlined processes, and increased responsiveness to changing needs. A major component to forming those relationships is collaboration. Downloading, editing, and emailing contracts back-and-forth invites errors and version control issues that clog up deals and delay signatures, not ideal when working to build a strategic relationship.
What is collaborative is the ability to make negotiation seamless by inviting all relevant parties to redline contracts in-document and online, while all comments and changes are tracked in a clear audit trail. With increased collaboration you reach agreements faster, accelerate deal cycles, and save money.
With deadline alerts managing contracts after the signature becomes automated. Email alerts are delivered at a set time—30, 60, 90 days out—making sure contract renewal dates or review dates don’t fall through the cracks. This also enables Procurement to stay on top of payment deadlines, and making on time or early payments is another way to build mutually beneficial supplier relationships, which can deliver savings through discounts, and first customer spots among tier one suppliers.
Lastly, efficiency. Commoditizing lengthy, complicated processes saves time, which saves money, while improving work life. Standardizing contracts and contract processes through approval workflows and templates is just one more step to bringing the back office forward, and ensuring compliance standards are met and risk it mitigated.
For Procurement teams moving fast is crucial—being able to respond to changing market conditions and competitors quickly. However, moving fast most often increases risk, unless, that is, the right processes are in place, enabling speed without sacrificing compliance. Connecting all contracts on one platform enables procurement teams to move fast while remaining compliant. Using a contract management platform ensures contracts are collected and maintained in a central repository. Contracts visible under or owned by the Procurement or supply chain function allows leaders to more effectively leverage the company’s spend, particularly in the area of services, where there is a great opportunity for cost reduction and risk mitigation. All the while, Procurement adds more value and becomes more relevant to the success of the entire organization.Another hurdle to growth? Adoption. That eProcurement solution is only as good as the people using it. Unlike rogue spend that can muddy visibility and make forecasting complicated or incomplete, contracts generated outside of approved processes or without the correct approvals in place or correct information included, can leave the door wide open to risk which can cost millions in fines and lost business.
Integrating contract processes into the existing workflow, without adding additional steps or complicated systems to learn exponentially increases adoption. Contract lifecycle management tools that integrate with the existing tools teams already use everyday, allowing native contract generation and viewing, deliver higher adoption rates, and in turn improved compliance, greater visibility, and faster growth.
What’s clear from our research is what’s needed isn’t more processes, it’s a better, more automated, more integrated process. Enter the platform approach, which we’ll discuss in detail in part four of our series.
Concord’s mission is to help companies achieve scalability and efficiency by automating their most central process, contracts. The cloud-based solution enables over 300,000 users around the globe to create, collaborate, sign, store, and manage their agreements all in one place. Founded in 2014 and headquartered in San Francisco, Concord is built by business for business.