Somebody said to me recently, “Show me a company that doesn’t have suppliers, customers or inventory and I’ll invest. For everyone else if they’re not effectively managing these risks then I’ll stay clear.”

Let’s consider just for a moment the very real possibility that your business struggles with gaining internal alignment and agreement over supplier engagement, cost saving expectations, contract visibility or commercial goals and objectives. Is it not then a possibility that your suppliers and service providers will struggle to perform at consistent and satisfactory levels for all stakeholders?

It is this lack of clarity and alignment that inevitably increases the risk of failure and certainly reduces the chances of innovation or well-managed supplier performance relationships. Commercially savvy businesses, large and small, recognise that a strategy of effective business means internal and external alignment over objectives to ensure relationships remain proactive, rather than always reactive.

A recent article in the NZ Herald talked about “New Zealand businesses are more susceptible than most [...] results suggest that on average, New Zealand businesses suffer more ...” (Hendery, 2010). We all have stories about how we purchased something, went somewhere, did something, acquired a particular product or service and for whatever reason it fell short of our expectation. New Zealand has a culture that could be described as more laid back, casual and trusting. There is nothing wrong with this however it does mean that, particularly in business, we are potentially more likely to run into problems because we have failed to obtain sufficient clarity and alignment over specific expectations, objectives or deliverables and possibly we have not read (or perhaps have read but if we’re honest, did not fully understand) the implications of what we are agreeing to, or our communications or documentation has fallen short in some way and we didn’t notice until it was too late.

In business, it presupposes there is a contact (verbal or written). However, since the contracting parties often engage in confused interactions and frequent misunderstandings they also do not see the problems in the same way. Thus it proves more difficult for these to be satisfactorily resolved. For smaller businesses this means putting the matter down to a ‘learning experience’ or perhaps even limiting a claim for damages. For other businesses there is the real possibly of unbudgeted legal costs and protracted litigation. In any event it has been said that you only litigate if you have more money than sense or you have no choice.

There are positive benefits and flow on effects in ensuring effective supplier/vendor management infrastructures in your business because it combines the efforts of procurement, finance and legal to ensure consideration of stakeholder requirements are met and consistent interactions within the business about managing the multiple aspects of any external supplier relationship.

10 things to consider are:

  1. Manage suppliers and contracts and create visibility
  2. Manage information on contracting parties
  3. Manage key dates electronically
  4. Standardise and automate form contracts and other documentation
  5. Maintain a contract terms library
  6. Use workflow automation to manage the contracting process
  7. Manage compliance requirements
  8. Reduce savings leakage
  9. Use reports to push information to stakeholders
  10. Deploy your changes for adoption – what’s in it for them

I’ll leave you with these simple thoughts - what dollar value do you put on risk for your business? What are you going to do about it? Can you afford not to?

Cathy has more than 20 years experience across a wide range of disciplines including Service Delivery, FMCG, IT, Banking and Telecommunications having worked with major New Zealand and dominant global organisations. Outsource management, cost saving and contract management strategies are areas she is both professionally and personally passionate about.