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Archive for the ‘Contract Management’ Category

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Who is reviewing your contracts? Are they missing anything?

Wednesday, July 6th, 2011

The answer is neither or maybe both. The first important question for each is who is actually evaluating the contracts, and just because they have a law degree does not mean that contract evaluation is a specific skill set the individual possess. This author recommends choosing who will provide this function within your company and then makes sure they have the skill set to do their job and stay up to date.

There are any number of contract management certificate programs available from prestigious and well know institutions. To name a few, there is Villanova University, The University of California Irvine and St. Louis University. In addition there are organizations that also offer this training. Probably the most well know is, the National Contract Management Association or NCMA that has been around for over 50 years.

Many of these organizations offer on line courses that can be completed within a reasonable period of time. Many of the University and College courses are actually accredited as well as affiliated with NCMA.

Once you have resources that are certified, provide them with the tools they need to do their job. All companies have 100’s to as many as 1000’s of contracts and most do not have a contract management solution. These solutions today are available via the cloud in Software as a Service models for very little investment. Most of these providers will also assist you in the creation of your Meta data and database population. 

Contact SafeSourcing for more information.

We look forward to and appreciate your comments.

Posted in Contract Management, Strategic Sourcing

Buyers; Soybeans are down and the Corn harvest will be up. So What?

Friday, July 1st, 2011

It appears as though the corn crops will be better than expected this year and as a result drive prices down on the supermarket shelves. The reason is because farmers planted more corn than usual based on what the futures market was telling them relative to other crops. Because they planted more and the yield will be higher futures actually went down. This should impact the price we pay for a variety of products impacted by corn.

If you don’t think that corn impacts many products, think again. Corn impacts beer, aspirin, livestock feed, carbonated beverages, Ethyl alcohol, textiles, soaps and hundreds of other products.

If you’re a buyer, you need to be aware of this as the impact in the market typically trails the crop by about 3 to 6 months. So while you are buying products you need to understand that costs should come down before year end and make sure the language in your contracts allows you to take advantage of this. Think de-escalator language on any contract between now and year end.

We look forward to and appreciate your comments.

Posted in B2b Supply Chain, Business Sourcing, Contract Management, Sourcing Strategy, Strategic Sourcing

So what are the benefits of SaaS? It sounds Sassy which means rude and disrespectful.

Friday, May 13th, 2011

If you have an e-procurement solution installed behind your firewall on your own servers, this might be the 1st place you want to begin saving money by replacing it with a SaaS based solution.

On demand SaaS (Software as a Service) by its nature is an internet based application and as such is accessible from wherever you happen to be as long as you have a network connection. With today’s broadband offerings, it literally means any where. In addition, since most of the newest versions of SaaS applications are native web based applications, they integrate very nicely with most business infrastructures.

The e-procurement buyer’s data at a SaaS provider is often more secured than the data at many business offices. Since this is the core business of a SaaS provider, the architecture of the application normally has multiple levels of redundancy, failover recovery and routine data backups. SaaS applications are, by-design, easier to update than locally installed applications and buyers usually experience lower feature upgrade charges as well.

The return on investment (ROI) breakeven point for an e-procurement solution is usually reached more quickly in a SaaS environment than a locally installed solution – often much more quickly. In fact there are many instances of breakeven ROI’s occurring with the first series of e-procurement events.

Stop wasting money and call a SaaS provider and while you are speaking with them ask if their offering is cloud based. More on that later.

We look forward to and appreciate your comments

Posted in Contract Management, E-procurement, E-procurement Solutions, E-procurement Tools

Knowing Who Your Suppliers Are – Onsite Visits – Part I of II

Monday, May 9th, 2011

One of the important practices recognized by many successful procurement professionals is that of performing onsite visits to both their new and incumbent suppliers.  So much can be learned about how your suppliers do business that may affect your future decisions and contracts.

Today’s blog will be focusing on visits to domestic suppliers and Part II will have more details on visiting your international suppliers.

If you are dealing with a new supplier and scheduling an onsite visit, this is the opportunity for you to validate all of the details they have presented in their RFP/RFI response or presentation; validating that they have the staff, resources and facilities to handle the demand you are requiring of them.

This will be an opportunity to meet the sales and support team that will be assisting you and your company when the inevitable problem does occur, so take advantage of this time to get acquainted with the supplier’s staff.
If you are dealing with an incumbent supplier, make sure you have thoroughly reviewed your existing contract so that details about the level of service and quality promised can be focused on as part of the visit.  Make sure that you request, in advance, any additional reporting from your IT department or from the supplier on the history of the relationship so far.  This would include quality issues, shipping issues, product delays, inventory availability or any other special circumstance that may have occurred.  This visit will be the right time for you discuss these with the supplier face-to-face.

A final very important area to spend time in your visit, whether new or existing supplier, is the shipping area.  Here you will have a very clear idea of how the supplier is organized and you may even get a glimpse at the companies they get their raw materials from as well as other customers they are shipping too for future reference and follow-up.  Information found in this area will also go a long way when having contract negotiations with your incumbent suppliers for concessions on how your products and deliveries are handled.

Onsite visits are critical to understanding who you suppliers are and can be extremely valuable negotiation checkpoints.  My next blog will focus on the differences and things to consider when visiting international suppliers.

We look forward to and appreciate your comments.

Posted in B2b Supply Chain, Contract Management, E-supply Chain, Retail Supply Chain, Supply Chain Procurement

When is the right time to renegotiate products and services contracts?

Tuesday, February 1st, 2011

For most buyers and category managers, cycles are important. That is that the normal flow of business dictates how and why they buy their products and services. Some financial related examples of this are End of Year, End of Period, contract expiration and capital need. Other examples may be seasonal needs, change in demand either up or down or growth through acquisition.

However there are other clues that should also be analyzed on a regular basis that play an important role in predicting cost increases even if you are only mid contract that might make you want to reconsider a contract that is already in place. One of those is unusual spikes in the commodity markets.

An example of the above is the forecast for oil prices. We are hearing a lot lately about oil hitting $100 per barrel with some forecasts as high as $105 be year end. That’s a clue to take a look at contracts that are impacted by oil such as resin markets and fuel prices that affect transportation costs such as diesel prices. Judging how realistic these forecasts are can also be tricky but here are also clues for that such as instability in areas like Egypt because they control daily transit through the Suez Canal of oil.

As a buyer you have to be aware of more than just the need to renegotiate a contract because it is expiring. If you need help doing that your e-procurement provider should be able to offer the category expertise to help you.

We look forward to and appreciate your comments.

Posted in Contract Management, E-procurement

Should prices really be rising based on the commodity markets?

Thursday, January 27th, 2011

Then yesterday as I was browsing another subject, I found the following on MSN. “Commodities had a weak session, which culminated in a 1.5% loss for its worst single-session slide in three weeks. Weakness was widespread among commodities”. My response was huh?

So just what is a commodity and how can a company keep track of these trends for themselves. According to Wikipedia a commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are often substances that come out of the earth and maintain roughly a universal price.

Your product costs should fluctuate periodically based on the commodity markets, but being aware of them allows you to enter terminology in your contracts that should protect you against any significant spikes and your supplier against any significant drops in the market. Without this language you are really playing Russian roulette with your company’s money.

Commodities exchanges that you can easily follow include:

1. Chicago Board of Trade (CBOT)
2. Chicago Mercantile Exchange (CME)
3. Dalian Commodity Exchange (DCE)
4. Euronext.liffe (LIFFE)
5. Kansas City Board of Trade (KCBT)
6. Kuala Lumpur Futures Exchange (KLSE)
7. London Metal Exchange (LME)
8. New York Mercantile Exchange (NYMEX)
9. National Commodity Exchange Limited (NCEL)
10. Multi Commodity Exchange (MCX)
11. International Indonesian Forex Change Market (IIFCM)

If you have a quality e-procurement partner they should be able to provide you with this type of data because it is still possible to compress pricing even in an up market. This author is not sure the preset trend is in that direction however.

We look forward to and appreciate your comments.

Posted in Contract Management, E-procurement

Do you want to stop CONTRACT leakage?

Thursday, January 13th, 2011

And it does not really matter who signed it or whether they had authority to do so in the first place.

Fortune one thousand companies can have as many as 100,000 contracts. Most of these companies do not have contract management software, maybe as few as 15%.. We also know that companies that do use contract management solutions have compliance ratings significantly higher than companies that do not. It is a well known fact that these solutions can reduce administrative overhead by up to 30%. Those savings although significant from an ROI perspective pale in comparison to the loses associated with a contracts in evergreen status or auto renewal that may include price increase language that required written notice to terminate or renegotiate a contract already in place. Just imagine a bulk fuel contract for millions of gallons with a single basis point escalator above a current Platts, OPIS or Gulf coast index if the contract evergreens. Ouch.

The good news is that a contract management solution like SafeContract™ can solve this problem and provide a near instantaneous ROI. SafeContract™ is offered in the form of Software as a Service or SaaS which makes it much more affordable than an in-house solution. The good news is that the data is yours and you only use as much of the system as you need.

Don’t wait any longer to reduce your administrative costs, manage discounts and rebates, make your auditors happy with improved compliance and eliminate ever greening.

Contact SafeSourcing® today.

We look forward to and appreciate your comments.

Posted in Contract Management

It’s just down right scary that 80% of fortune 500 companies do not have contract management software.

Friday, January 7th, 2011

If you happen to be a large company as all in the fortune 500 are, this number is enormous.

The reality is that most of the information in a contract is not language one needs to be concerned with unless there is some form of break down in the relationship, product or services deliverables. There are however some fields that we want to know about such as expiration dates, escalator language, written notice dates, milestone attainment and service levels to name a few. Most of this data can be referred to as Meta data or essentially data about data. These data represent the information companies should be aware of in order to reduce their exposure to leakage and evergreening.

After many pages of definitions and legalese, most contracts can be broken down into the following areas.

1. Mutual Consent
2. Offer and Acceptance
3. Mutual Consideration
4. Performance or Delivery
5. Good Faith
6. No Violation of Public Policy
 

Contract management does not have to be a difficult process. Contact SafeSourcing if you’d like to begin to bring your contracts under smart management with SafeContract™ which includes the development of your Meta data tables.

We look forward to and appreciate your comments.

Posted in Contract Management

A Contract Management Primer.

Thursday, December 2nd, 2010

If you put a bunch of senior executives in a room and ask them what they would like in the way of contract control; the meeting could last weeks. At the end of that time you might not have anything that resembles what you started looking for. And that is why we have the saying that a camel is a horse created by committee.

Most contract management systems have relatively short ROI periods. In fact a company might even be lucky enough as they go through their data collection process to find a single contract that when analyzed might pay for the entire system.

There are all sorts of benefits associated with using contract management software. Probably the most important and least recognized of which is finally having all spend data in one location enabling more effective negotiations. If you have ever run an e-procurement event and tried to assemble a simple specification or incumbent supplier data you already understand the time involved. Administrative costs alone can be reduced by 25-30%.  That’s a huge number in today’s world of insufficient staff.

If you want to get started, here are some basics that a system should be able to provide.

1. Create contracts
2. Maintain contracts
3. Control contracts
4. Track user access to contracts
5. Track and monitor the status of contract Meta data
    a. Award date
    b. Contract begin date
    c. Contract end date
    d. Begin delivery date
    e. Escalator language
    f. Notification clauses
    g. Termination Clauses
6. Automatically alert buyers and management of required actions
7. Custom Reporting
8. Supplier Scorecards

If you want to get started tomorrow, contact SafeSourcing and ask about SafeContract™.

We look forward to and appreciate you comments

Posted in Contract Management

Retailers, how many of your e-procurement contracts contain evergreen language?

Friday, November 12th, 2010

In this case your supplier wins because your contract contains evergreen language. Some retailer’s think this is a good thing and it could be. Paired with other language that might identify escalator or de-escalator language that protects both the supplier and the buyer against abnormal commodity increases this could be win-win. The bigger issue is who is responsible for monitoring the dates and how will you be alerted if the adjustments don’t take place?

This begs the question; just what are are evergreen clauses within a contract and what do you need to do to be careful with them.

According to Black’s Law Dictionary an Evergreen contract is a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties”

The potential problem with an “evergreen” clause in your contract is that this type of contract automatically renews at the end of the contract term, unless one of the parties notifies the other party that it does not want to renew the contract.  This notice normally must be given within a specified time period such as 60 to 90 days prior to the end of the current contract term. This takes us back to who is going to monitor this time frame and alert you to the fact that something is required?

A significant step in conducting quality e-negotiation events is to understand the contracts you are wishing to negotiate.

We look forward to and appreciate your comments.

Posted in Contract Management

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