8 Ways to Supercharge Supplier Contract Management

In an increasingly interconnected world, the old saying rings truer than ever: no business is an island. To meet evolving customer expectations, deliver high-quality products, and scale the business, all companies must rely on an ever-growing ecosystem of supplier partners. From keeping office supplies stocked to deploying software to providing facilities management, suppliers are integral to enterprise success.

As companies require more and more vendors to keep the business running smoothly,strategic sourcingand procurement leaders are challenged with effectively organizing and managing supplier contracts.

While sourcing teams recognize that a holisticsupplier contract managementstrategy can save time and money, most businesses still operate via ad hoc processes and on a case-by-case basis. In the changing world ofsupplier management, however, the old way of managing contracts will no longer make the cut. In this article, we’ll dive deep into supplier contract management to give you and your team actionable ways to supercharge your own contract management.

What Is Supplier Contract Management?

Supplier contract managementis an integral part of contract life-cycle management, and is the process through whichprocurementteams partner with suppliers to meet business objectives. While many believe that contract management involves only the papers being signed, it extends far beyond the agreements themselves.

Before even entering into contract negotiations, strategic sourcing and procurement leaders must first find the best suppliers for their needs. Often done through a request for proposal (RFP) process, this involves the careful evaluation of different options to find the best partners. After honing in on a supplier, teams will then enter into contract negotiations to define the products or services to be provided, agreement length, payment terms, renewal options, and more.

After each contract is signed, strategic sourcing teams must track supplier performance and ensure that the supplier is delivering on its contractual obligations. Sourcing and procurement also need to stay on top of in-process agreements to keep ahead of surprise renewals and deadlines. Traditionally, supplier contract management has been a manual process with contracts siloed away across different desktops, in shared drives, and in desk drawers. This ad hoc system often leaves procurement professionals wading through lengthy email chains and clunky systems to find critical contract information. Without clear visibility into contract data, many sourcing teams run the risk of losing their leverage and leaving critical dollars on the table.

8 Best Practices for Supplier Contract Management

Strategic contract management is a critical piece of the puzzle for procurement leaders who are looking to elevate the role of sourcing in the business. When sourcing and procurement leaders can access their contract data, they can better identify gaps, findsavings opportunities, and expand partnerships with their strategic suppliers. Here are just a few ways you can take supplier contract management from a tactical exercise to a strategic opportunity:

1. Engage proactively with key stakeholders．Too often, partners such as finance, legal, and technology teams are tapped late in the contract process, which can lead to stalled negotiations or even broken agreements. It is essential to meet with these stakeholders before beginning talks with suppliers in order to understand the financial, compliance, and data privacy requirements that vendors must meet before partnering with the business.

2. Establish performance expectations early．为了避免早期终止妊娠或less-than-satisfactory partnerships, be clear about your performance expectations upfront. Sharing your evaluation criteria during the contract process will not only help you weed out suppliers who can not meet your business’ standards, but it will also help establish transparency between your team, your vendors, and your stakeholders. This kind of visibility helps create strong, high-performing partnerships.

3. Centralize your contract data．One of the largest barriers to strategic contract management is the lack of visibility into supplier data. Procurement leaders must be aware of upcoming renewals, payment terms, and contractual obligations in order to see around corners and plan for the future. With no clear insight into how resources are being allocated or when contracts are ending, procurement leaders risk missing critical savings opportunities. Centralized data, however, solves this challenge by providing the visibility needed to make better contract decisions and reduce spend leakage.

4. Create a hub for collaboration．Sourcing and procurement teams are the glue between the business and its suppliers. As a result, they often find themselves as the go-between, shuffling communications from stakeholders to suppliers and vice versa. Being the middleman, however, is inefficient and takes sourcing and procurement away from more strategic initiatives such as identifying maverick spend andevaluating supplier performance．By providing a centralized hub for communication, procurement can connect stakeholders with suppliers directly and ensure that essential information gets delivered to the right people at the right time.

5. Establish approvals workflows．Contracts often get stuck in process because necessary stakeholders have not approved them or, in some cases, have not even seen them. Strategic sourcing teams that have a clear understanding of necessary approvers can save time with standardized workflows that automatically route contracts through all required approvals.

6. Develop a regular contract review cadence．When contracts are left without oversight, surprise deadlines strike. Setting up weekly or monthly reviews of all contracts can help you and your team keep track of what requires immediate attention and prepare for upcoming performance reviews and renewals.

7. Connect supplier contract management to broader business goals．Sourcing can become a more strategic partner to the business by demonstrating how supplier contract management directly impacts the bottom line. Procurement leaders with easy access to their supplier contract data can use this information to make smarter decisions around risk mitigation, resource allocation, and project prioritization. With more insight into overall contractual spend, sourcing and procurement teams can also better report on total savings and identify opportunities to strengthen supplier partnerships across the business.

8. Prioritize strong relationships over “bang-for-buck” value．Procurement leaders everywhere agree: Cost savings is no longer king. To maintain business continuity amid volatile supply chains and pandemic disruption, many strategic sourcing and procurement teams relied on their strong supplier partnerships. Rather than looking for the best deal for the business, consider terms that are mutually beneficial in order to create long-lasting relationships.

How Top Companies Can Drive Results With Supplier Contract Management

More companies are realizing that a supplier management process is essential to their overall business strategies. To better support its scaling business, a leading technology company chose Workday as its contract management system.

With more than 30 million global users, this technology innovator manages thousands of supplier contracts in order to provide great service and scale the business. Before partnering with Workday to digitize its contract process, the company’s procurement team had limited insight into its 3,000-plus global contracts. Without a standard process, the sourcing team found it extremely difficult to identify strategic partners and assess risk across the business.

The technology company ultimately choseWorkday Strategic Sourcingas its contract management system in order to centralize contract data, provide visibility into risk, enable stakeholder collaboration, and drive savings. With a single source of truth for contracts, procurement was able to build stronger relationships with supplier partners by consistently delivering on its contractual obligations. A contract repository also empowered internal stakeholders by providing them with necessary information in one place.

A digital contract system not only saved the procurement team hours of tracking down information, it also saved money. With Workday, the procurement team was able to identify spend leakage and understand which supplier partnerships were working, and which needed to be reevaluated. Using contract data, the sourcing team drove approximately $100 million in savings. The team also built out a strategy to cut tail spend by more than 50% by evaluating one-time and sole-source suppliers.

Supplier Contract Management Is Evolving

It’s clear that conventional supplier contract management will no longer pass muster as companies continue to rely on a larger pool of vendor partners. To support corporate goals and maintain business continuity, sourcing and procurement teams must leverage their contract data to drive savings, track renewals and deadlines, and ensure that they are delivering on their contractual obligations.

Without a dedicated contract management strategy, crucial information such as length of agreements, renewal dates, and deadlines can get lost in the shuffle. To guard against these issues, companies are increasingly turning to digital contract management systems that automatically centralize data and provide a hub for collaboration.

This enhanced visibility empowers sourcing teams to identify strategic suppliers and manage relationships across the business. In addition to gaining deeper visibility into suppliers, strategic contract management also helps sourcing and procurement professionals understand their businesses’ total spend and fill supplier gaps that lead to costly spend leakage.

Ready to take your contract management to the next level? Explore howWorkday Supplier Contract Managementcan help you centralize your contract data and drive immediate business impact.