Ever been confronted with the terms of a contract or service agreement that were long and seemed all too legalistic? Or worse, the deal appeared to be offered on a take-it-or-leave-it basis with terms that were perhaps oppressive and appeared one sided? Did you feel like you had to say ”yes, I do, whether I want to or not”?

So, to formally contract or not, and how do you know you have got it right? Contracts can be wholly oral [verbal], partially oral and partially written or fully written. Whichever form your contract takes it should be arranged so that the terms are mutually beneficial and accordingly open for consideration and negotiation by both parties. Difficulties frequently occur when there is disagreement over what was agreed.

Presupposing a contract has been formed, then anyone who has ever managed an outsourced arrangement knows just how difficult it can be to maintain visibility of performance and make sure that contractual obligations are met by your organisation or the service provider. Consider what is captured in business and used as leverage to increase customer relationships. Then applying the same logic, what is captured and known about the suppliers to the organisation? It is very easy to get caught up in the every day and forget to review these commercial arrangements. However, if things go wrong they often go wrong quickly and badly because the individuals involved often had a separate set of expectations about what they were doing and what they thought others were doing. In hindsight, a regular performance review that acted to manage critical relationships and reconfirm expectations is much more likely to succeed or to highlight critical points of failure or areas of risk before it’s too late. 

Let’s do a 180° turn and consider the view again from the perspective of the consumer. When determining a supplier and considering the best fit for your organisation there are several key points to consider before deciding whether to engage or purchase the products or services. The following is a high-level list, however it will help towards determining whether the supplier is a sound investment for the business.

  1. What is the supplier selling? Does it meet current and any future needs?

  2. Can you leverage off this supply relationship?

  3. Is there an existing relationship in the business with a similar supplier (e.g. consolidation or benchmarking)?

  4. What type of growth potential does this Supplier have?

  5. Do they have technologies that keep up with industry trends or provide them with a point of difference?

  6. What market presence does the supplier have (i.e. local, national or international?)

  7. What customer service benefits or guarantee of consistency for performance does the supplier offer (e.g. regular management account meetings, response and restore commitments)?

  8. Does the supplier offer any value adds? Something outside the square that would benefit your organisation?

  9. What risk is there to the products or services and what mitigation needs to be considered? Note: don’t be naive there are always risks so dig deep.

  10. What is the quality of their resources? Note: resources could be people or technology
Vendor Management is proud to be a leading provider of supplier performance management services. Further to this article, please take a few minutes to view our website www.vendormanagement.co.nz and see how Vendor Management can help optimise your business’ outsourced supplier engagements, reduce commercial risk, reduce saving leakage and up skill staff. Call us today on NZ 0800 464844 and ask us about our RISK FREE services.
Cathy has more than 20 years of 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.