It doesn’t matter where you are in your procurement career, we all hit that patch of work where the “low hanging fruit”, is higher in the tree. One of my bosses said to me once, “we need to string the singles, to keep up the run total, as hitting home runs have become scarce”. We often find the obvious targets for savings or efficiency with a look at the spend data, or an expiring contract where there has been less than optimal service fulfillment. While the big targets may have been addressed, organizations are always buying. However, not every agreement gets that recognition of significant savings. As a procurement professional we are always trying to avoid risk and bring value.
Also during these times, a review of processes may reveal a mature buying organization or cultural readiness to transition a new supplier are not easily executed or supported because of competing priorities. There are ways when looking at indirect expenditures where you can deliver value to your firms. Over the years my view of indirect savings value can be segmented into three major areas. These are:
- Traditional procurement activities [ i.e. taking a category to market where standard RFP and RFQ processes execute leverage savings]
- Contracting for a new service or project – where you have never purchased this service or material before
- Compliance activities – where these is little discretion but the organization is required to buy or use a specific firm
In areas 2 and 3 there may not be much room for traditional savings, but good contracting is important to the business.
However, one of the hats a procurement professional wears, is that of corporate “sentinel”. Just having a procurement review of agreements, delivers value to a business. These reviews highlight simple areas where standard supplier provided agreements pose concerns to businesses like:
- Nonstandard pay terms
- Limitations of Liability / Damages concerns
- Purchase volumes more than a deliverable commitment
- Software Licenses or commitments which may not be accurate
- Confidentially terms
- Termination rights
- Renewal terms
- Change order governance
Contracts can appear to be simple, but carry obligations which may not be well understood to inexperienced buyers of goods and services. The above list is an example of areas where reading, questioning and understanding the joint obligations of the parties is a good practice. The value a procurement or sourcing professional should not be limited to strictly cost savings, year over year. Reading agreements and highlighting concerns to a legal professional is an area that delivers good process controls and risk mitigation. Partnering with your firm’s subject matter experts in a collaborative way demonstrates professionalism and cross-functional business alignment. It limits the amount of buyer’s remorse, where quick signatures commit more than realized.
SDI has the capability to assist firms with supplier management, data analysis, and MRO supply chain management. We understand and respect your firms level of preparedness to adopt change and can jointly develop meaningful and achievable targets to support your initiatives.