Collaborative Business Commerce considers how you buy, how you sell, and how you manage cash not just within the four walls of your business but with your trading partners. At the heart of business commerce is the contract, representing the relationship between those trading partners. In this session, learn from thought leaders on how automation has helped them make contract management a key imperative and strategic differentiator for their company in not only containing costs, but in adding bottom-line business value.
4. Sourcing and Contracting Today
Requires the ability to deliver savings results quickly
Are my Buyers
meeting
savings
targets?
What
information do
we have on the
supplier?
Where is the
latest contract
template?
Where is the
supplier’s
contract?
I must
increase my
spend under
management!
Am I missing
opportunities to
re-source or
renew contracts?
How do I
deliver a rapid
time-to-value?
I need to
maximize cost
savings!
8. Contract Management: Typical
Adoption Stages
Stage 1:
Central
Repository
Easy to search
Good access
controls
Contains header/
structured data and
all documents
Automated alerts
Reporting
Stage 2:
Contract
Authoring
Use of clause and
template libraries
Integration with
Microsoft Word
and external
collaboration tools/
workflows
Associated
reporting
Stage 3:
Integrated
Compliance
Structured item/
pricing data
Automated back
end establishment/
call-off
Usage-based
alerting
Advanced usage
reporting
9. Determining Contract Management
Priorities
Repository
• Contract portfolio assessment (active, expired; spend coverage)
• Reporting and visibility needs (for manual compliance as well)
Authoring
• Streamlining contract creation processes
• Minimizing risk relating to contract language
Compliance management
• Employee usage of the right contracts
• Automating pricing structure compliance
What is your company’s top priority today?
13. From static repository to collaboration
HBR: To build collaborative communities, companies must master a new set of
skills:
• Define and build shared purpose
• Cultivate an ethic of contribution
• Develop scalable processes for coordinating people’s efforts
• Create an infrastructure in which collaboration is valued and rewarded
13
14. Repository
14
Current state
Challenges Milestones / Deliveries
• Two Sourcing organizations with different reporting lines
• Category management area of responsibility do not always follow
organizational structure
• Five category mgt. teams and two contract mgt. teams reporting
into two different organizations
• Contract owners and budget owners not always identical
• Lack of clear guidelines and contract structure
• Lack of clear change procedures
• Data mismatch
Creation of Business process ownership
forum/Change body
Using ”Payment forms” to allocate contract spend
All savings registered in Ariba
Creation of Operational Handbook
Contract naming convention
Creation of supplier workspaces
Learnings Master Data Project
• Business Process Ownership
• One operating model
• Clear guidelines
15. Status on CM Repository
• Number of active suppliers: 1053
• Number of active contracts: 2053
15
16. Authoring
16
Current state
Challenges Milestones / Deliveries
• Negotiating changes to our contract template require access to
scarce legal resources
Creation of a clause library (Low tech)
Ariba integrated Clause Library?
E-signing?
Learnings
• The business case for authoring Contracts in Ariba Contract
Management is still a work in progress since most of our
contracts are based on our internal Master Contract template
17. Compliance management
17
Current state
Challenges Milestones / Deliveries
• Lack of knowledge about “Global” agreements and terms
• Lack of good service descriptions lead to “double buying” of
same services
• Not able to capture spend per contract
• Not able to follow up on compliance and perform discount
management on all contracts
Develop tailor-made dashboards on IPhone app
Capture contract on invoice
Using payment forms to allocate spend
E-auctions as a call-off method in “falling” markets
Better service descriptions on contracts
Enrichment of the UNSPSC structure to better suit
our needs
Learnings
• Communication, communication, communication….
• Reliable data is a prerequisite for managing compliance
• Good processes are a prerequisite for reliable data
According to Aberdeen estimates, around 2.2% of the average enterprise’s savings are lost due to savings leakage out of a possible 5.4% of negotiated savings from the surveyed strategic sourcing groups. That equates to almost 41% of lost negotiated savings! Why is this occurring? Contract utilization has long been the Achilles heel between negotiated savings and what budget owners and CFOs actually experience at the end of the year. The Hackett Group estimates an average of $9.4M for every $1B in spend of lost savings due to contract non-compliance, and that figure can be as high as $18.8M for some companies. This results in a sizeable opportunity for P2P managers to capitalize on enterprise value. From a competitive standpoint, there is a 26% gap in spend between organizations that drive the highest levels of contract compliance versus the bottom quartile. Aberdeen. (2010). Strategic Sourcing: The 2010 Guide to Driving Savings and Procurement Performance. Aberdeen.The Hackett Group. (2008). Purchase-to-Pay Alignment: The Missing Link to Delivering on Spend Cost Reduction. The Hackett Group.