Don't get stuck with suppliers

What could be easier than just continuing with the known and trusted suppliers? At least then you know where you stand. Unfortunately, then you don't know what you are missing.

Risks
Companies often have the same attitude towards suppliers as consumers. They don't like continuous switching either. It only costs time and money. Figuring out conditions, comparing prices, which is often difficult. And then negotiating. A long and gruelling process often for companies.

Especially if you work in a larger organisation. Then you are soon talking about a hundred different suppliers or more. But neglecting your contract management can have a major impact on your performance and pose a major risk to the stability and continuity of your organisation.

Ongoing contracts
To avoid annual negotiations, many contracts have the principle of tacit renewal. This is convenient for both parties. But over time, the quality of the supplier often changes. The product may have changed and the service slowly eroded. Suppliers, especially in the initial period of the contract, try very hard to keep YOU, the customer, happy. Over time, attention neglects and you are just one of many customers.

It is not only on the supplier's side that things change. Your process does not stand still either. You have to deal with a rapidly changing market where customers have ever higher and different requirements. The question is whether the contract you have with your supplier still reflects this ? This slow erosion can quickly lead to high costs. Often it is the CFO who raises the alarm because, based on financial analyses, the ratios start to skew. Then renegotiation suddenly becomes a difficult and painful process.

Contract management
In many larger organisations there is a Procurement department but they often only manage the large, strategically important contracts. There is no overview of the many medium and small contracts. These are spread across the departments, deep in drawers. The management of those contracts is often based on personal contacts and trust and not on objective measurement data and results. Thus, your margin erodes invisibly but inevitably.

So good contract management is essential for your organisation's bottom line and to ensure that all your suppliers remain optimally aligned with your processes and the changing market you face. So avoid tacit renewal.

Make sure you can view and manage all contracts centrally. Above all, make sure you continuously evaluate your suppliers on their performance and quality that you have contractually agreed with them. A good procurement and contracting system that can monitor your suppliers from agreement to cash flow is then certainly not an unnecessary luxury.