Vendor Management: Streamlining Efficiency with Centralized CLM Systems
Contracts are like laundry. Wait till you raise an eyebrow. Hear us out –
Like a new shirt, a contract brings excitement and hope when added to your business wardrobe. However, over time, it can gather dust and neglect, risking a place in the forgotten pile if not properly managed.
The Importance of Effective Vendor Management in Preventing Value Leakage
A KPMG report highlights that in Vendor Management, value often shifts from the pre-signature to the post-signature phase of contract lifecycle management, leading to significant value leakage.
Inadequate obligation management compounds this issue, as supplier and contract management teams become bogged down by low-value manual tasks due to insufficient automation. This is critical for key areas like performance, contract, financial, and risk management. Without centralized vendor data, Vendor Management can easily result in lost expectations and value.
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 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.
Inefficiencies in vendor performance can lead to hidden costs and lost revenue. A 2021 survey by EY Law and Harvard Law School found that half of the world’s major companies experience lost revenue and missed opportunities due to poor contracting processes. Here are some 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 Vendor Management – a Skeleton in the Sloset
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.
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.
ProEn can 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. Write to us at contactus@proen.co.in.
Check out this article: Why is Vendor Management Important?