Streamlining Vendor Management: Enhancing Efficiency with Centralized Systems in CLM
Contracts are like laundry. Wait till you raise an eyebrow. Hear us out –
Just like that new shirt that you buy excitedly, a contract is full of ‘new’ feelings when you put it in your business wardrobe. It is full of new hope- which can rub off well on all the other processes sitting in that wardrobe too. But with time, this very ‘new’ contract gathers dust, neglect, and crinkles. Unless paid attention to, it can quickly end up in a forgotten pile of clothes. And it stinks.
Vendor relationship management – with moth-balled processes
According to a KPMG report, there is often a shift from the pre-signature to the post-signature phase of contract lifecycle management, where much of the intended value of the contract is lost through value leakage. It can also be forgotten through inadequate obligation management. It can happen because the focus of the supplier and contract management teams is exhausted on low-value and manual activity due to a lack of automation. This is very apt for the key pillars of performance management, contract management, financial management, and risk management. Without proper centralized vendor data, a contract’s initial expectations and desired value can easily fall through the cracks.
The effect is more profound and riskier for vendors. A taut contract helps you keep a good grip on vendors. But only that contract is managed well. Without this attention to vendor relationship management, you can easily find your business getting lost in the:
- Inability to track contracts
- Getting overwhelmed with too many vendors, dates, details, and missed goals
- Delayed approvals and vendor clutter
- A hard-to-manage complexity of vendors and their paperwork
- Room for vendors for negligence missed deadlines, and tampering with costs
- Room for conflicts with vendors who have good intentions but are not being monitored well
The wrinkles are not just aesthetically-improper. They can also affect the entire wardrobe in direct and indirect ways. Poor vendor relationship management can lead to badly-managed contracts, which, in turn, can have a ripple effect on product quality, business performance, service quality, employee morale, and customer experiences. Not to forget the indirect and hard-to-spot rise in costs and revenue loss because of all the chaos caused by vendors not performing as expected. This explains why half of the world’s major companies surveyed face lost revenue and missed business opportunities as a result of inefficiencies in their handling of contracting processes, according to a 2021 EY Law and the Harvard Law School Center on the Legal Profession survey. Here are a few key findings.
As highlighted by a McKinsey report some time back as well, suboptimal contract terms and conditions, combined with a lack of effective contract management, can cause an erosion of value in sourcing equal to nine percent of annual revenues.
Poor contract management – a skeleton in the closet
When vendors are not managed with the necessary attention and guardrails in place, procurement often takes a narrow view of business value when setting terms and conditions. That’s when contracts miss the opportunity to be significant enablers for future value creation from demand, operations, and supply chains. All this limits a company’s ability to get better performance from their suppliers and vendors. The failure to evoke high and consistent performance metrics and the inability to make improvements can also directly impact a company’s balance sheet. As McKinsey found out, poor supplier performance can result in higher total costs of 10 to 20 percent in the contracted category. All this can lead to shadow or downstream costs that lie beyond the view of procurement when negotiating the initial purchase price and contract terms that do not incorporate a life cycle total cost of ownership (TCO) perspective. Let’s not forget what happens when late deliveries can have a knock-on effect. Or the expenses that balloon when manufacturers have to pay additional overtime or credit customers for delays.
Fix those furrows – with smart CLM
The best way to pre-empt all these risks and costs is to invest wisely in good contract lifecycle management (CLM) with centralized systems. For that, you can leverage the expertise of Proen. With ProEn you get CLM expertise backed by the depth of over 20 consultants, seven legal specialists, and domain-specific developers that are a class apart. Such specialists bring you the end-to-end grip of everything related to contracts- from contract renewals to negotiations to storage to compliance- all the way up to automation. They help you with both the strategy and execution of centralizing contract creation so that you can successfully streamline business processes while ensuring alignment with regulations. With Proen, you can create an easy-to-use, central repository for every contract, bridging every contract phase.
A robust contract lifecycle management (CLM) solution with centralized systems is the hot iron to remove the wrinkles from vendor relationship management processes. So plug it in and have a crease-free contract lifecycle management.
Talk to our experts to learn more about building your CLM processes with Proen’s expert-led, technology-driven solutions.