– Supplier Contractual terms
– Purchasing volume with those suppliers under control of agreed upon terms
In pursuit of maximizing/managing spend, many procurement professionals have devised numerous intelligent methodologies for selecting the correct suppliers and for negotiating the best possible terms. Unfortunately a lot of the work done on these matters exists as a point in time. For example, selecting a supplier at a single point in time and you set contractual terms at a point in time to last for a period of multiple years. What is not accounted for is that as soon as you lock in a contract with a supplier much of the details regarding the supplier will begin to change almost immediately.
Just like precision machinery, supplier information degrades over time if not maintained properly. For example, Lavante often finds that a customer’s supplier file includes nearly ten percent overlap in the supplier population. That is to say one in ten suppliers are related to some other supplier in the population – but that connection is not visible to the customer. This unseen linkage between suppliers can lead to significant profit loss in the form of missed price breaks, volume discounts, and rebates.
True spend management requires the best of breed technology and processes to select suppliers and negotiate terms. In addition, due to the constantly changing landscape, it is important to manage and refresh the supplier information in real time so that enterprises have ongoing visibility into the constantly evolving relationships within the supplier population.
Precision machinery requires lubrication, sharpening and maintenance at continuous, frequent intervals. Similarly, accurate and well maintained supplier information can reduce unnecessary errors which will help you avoid over-payment all while improving organizational efficiencies and providing your company a competitive advantage in strategic relationships.
To find out more about Lavante’s solutions to help maintain supplier information please click here.