In the complex landscape of procurement, Contract Management often gets overlooked. Yet, as organizations grapple with economic volatility and technological challenges, its pivotal role is increasingly apparent. This blog post illuminates the journey towards efficient procurement, highlighting Contract Management's indispensable part. Join us as we delve into the compelling reasons behind making Contract Management a cornerstone of your procurement evolution.
While many organizations struggle with comprehensive Source-to-Pay processes, the need for modernization is now pressing due to inflation and sales impacts from the pandemic. Transitioning to efficient procurement tech, however, presents challenges like substantial data requirements, need for user training, demand for immediate value, and necessity for user satisfaction.
The recommended starting point is e-Procurement, given its ability to capture essential spend data. Once implemented, Spend Analysis should follow, as it identifies the largest opportunities and guides subsequent steps.
Next, Supplier Management is crucial as all functions involve interactions with suppliers. Then, though it may initially seem counter-intuitive, Contract Management should precede Strategic Sourcing.
Diving deeper into Contract Management, it's evident that it’s not uniformly practiced across the board. Often, it's seen as a nuanced amalgamation of three facets we might call a NAG – from the initial stages of Negotiation and Analysis of the contracts, to their Governance. But a common challenge lies in vendors’ tendencies to specialize dominantly in just one of these three areas.
Existing contracts and purchases underscore the need for modern Contract Lifecycle Management (CLM), as organizations grapple with tracking contracts, understanding obligations, knowing pricing escalations, and efficiently negotiating new contracts.
Contract Management might not identify significant opportunities, but without it, savings from strategic sourcing may never materialize. Hence, effective Contract Management is the bedrock of a seamless Source-to-Pay process. Despite challenges, the payoff in savings and efficiency makes this journey worthwhile.
Understanding the sequence of implementing procurement technologies can be challenging, but it's essential for realizing their full potential. The above discussion emphasizes the role of Contract Management as a vital component of this sequence, even if it seems less intuitive than other important steps.
More on Source-to-Pay
Previous article: Spend Analysis & Strategic Opportunities
Next article: Contract Management: Negotiation Essentials