Supplier Contract/Agreement Management is the link between Strategic Purchasing value creation and Tactical Purchasing's ability to capture value. Cloud based Software as a Service solutions offer small, medium and large business a relatively low total cost solution that will capture more savings.

1. Effective Supplier Contract Management
Captures 50% More Savings
Supplier Contract/Agreement Management is the link
between Strategic Purchasing value creation and Tactical
Purchasing's ability to capture value.
BillKohnenAsiaPurchasing
ConferenceShangriLaFutian
2011

2. Overview
• A Supplier Contract Management process is typically not
viewed as a strategic imperative.
• A Contract Management process is the main key for fully
capturing up to 50% more real negotiated savings.
• A Contract Management process also can result in improved
productivity of stakeholders and ultimately better customer
satisfaction
• A process does not need be overly complex or expensive
whether internally developed or provided by a third party as
Software as a Service cloud based solution.
BillKohnenAsiaPurchasing
ConferenceShangriLaFutian
2011

3. Contract or Agreement?
BillKohnenAsiaPurchasing
ConferenceShangriLaFutian
2011
• Contract management – That Suggests a static lawyerly
document that is focused on detailed protections against
things not likely to happen with business terms as an
addendum
• Agreements are focused on what will drive mutual value
for 2 parties looking forward and how they will measure
and achieve success. Naturally in todays world agreements
are flexible and subject to modification to reflect changing
conditions
• Purchase orders are contracts

4. Best Practice
It is not best practice for purchasing organization to have an
overly legalistic and view of contracts/agreements/purchase
orders.
Best Practice:
• Relies on boilerplate terms.
• Almost never requires a Legal review of any agreement.
• 90% of contacts/agreements are purchase orders
• Focus is on clear reasonable business terms.
• Terms of key agreements available to all stakeholders
• Process capture more negotiated savings

5. Agreement Managementis the LinkBetween
Value Creation and Capture
Tactical
Purchasing
Value Capture
Agreement
/Contract
Management
Process
Strategic
Sourcing
Process
Value Creation
Even world class organizations can fail to capture 25% of
expected savings while for other organization s the actual savings
can be less than 50% 0f expected

6. Agreement Stakeholders
Agreement
Accounts
Payable
Legal
Strategic
Purchasing
Tactical
Purchasing
Finance
Product
Line
Quality
Suppliers
Customers
With so many stakeholders no wonder compliance is a challenge

7. Typical Approaches to Managing
Agreements
Individual Does
All
Can manage up
to 12 agreements
effectively
Multiple Stakeholders
Attempts to centralize
agreements on shared
drive or even physical
central file
Duplicated effort an
failure to capture savings
significant 30% to 40%
Many Dispersed Stakeholder
Might be centralized at site or
regional (share point, enterprise
tools) but challenge across
organization.
Failure to capture saving
approaches 50% . People do not
even try to avoid duplicated
effort
Small Company
Medium Company
Large Company

8. Emerging Better Options
1. Cloud Based Software as a Service solutions that provide
core features at a total cost that is lower than trying to
manage internally.
2. Solutions that are integrated into a purchasing suite
3. Some organizations use other third party tools such as
Salesforce combined with an electronic signature tool like
Adobe. While this appears a reasonable option utilizing
what may be existing solutions it can be expensive to scale
ultimately access will be limited because of cost.
4. Outsource to a shared service center in a low cost country .
While the actual work may be manually intensive there, the
total cost and level of service can be better.
BillKohnenAsiaPurchasing
ConferenceShangriLaFutian
2011

9. Summary
• Effective Supplier Contract/ Agreement Management is
important to fully capture negotiated savings
• Small, Medium and Large business can utilize reasonably
priced cloud based solutions to capture more cost savings.
BillKohnenAsiaPurchasing
ConferenceShangriLaFutian
2011