This is probably one of the most difficult steps in the entire procurement lifecycle.
I wrote this a while ago, it’s still true today. If you miss any of these steps your sourcing efforts have been wasted.
Stopping contract leakage is one of the most difficult tasks in the entire procurement lifecycle. To begin with, you need to understand where the data to be measured is kept. Good luck if you do not have a contract management solution. Once you have a clear idea as to the location of the data, it needs to be looked at on a regular basis in order to insure leakage is not occurring. The question here is what constitutes leakage and how often it should be reviewed such as monthly depending on contract language. Most contract management systems have alerts that can be triggered as frequently as required.
If you had a contract management system, most of the following list speaks too many of areas in which contract leakage can occur and can also be measured. These discrepancies happen in all companies large and small. If you are aware of them, capture them and report on them there is a reasonable possibility of controlling them. Again, you can’t do it without a contract management system
1. Buying without a contract.
2. Expensing something outside of a contract
3. Having multiple contracts in place:
4. Executing a new agreement when one is already in place
5. Paying a price different from the contract
6. Delivery variances
7. Quality specifications variances
8. Making payments at a prices different from the contract
9. Scope creep of the product or service purchased without change control
10. Resulting Invoice discrepancies
11. Missed volume discounts
12. Insurance discrepancies
13. Shipping discrepancies
14. Expired contracts resulting in price uplift (evergreening)
15. Overtime Violations
16. Material discrepancies
17. Sub Contractor discrepancies
Don’t work hard to drive benefits from your procurement organization and then lose much of what you have gained due to contract leakage. Ask your e-procurement solutions provider how they can help.
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