Buyers Meeting Point procurement by Kelly Barner

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10 Contract Contributions to Business Agility

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When you think about business agility, especially when software and analytics are to be applied, one of the last areas you’d probably think to focus on is contract management. Although today’s contracts are more electronic and automated than their paper-based predecessors, they are still managed as a relatively static component of the end-to-end P2P process.

In fact, some procurement organizations consider contracts the ‘finish line’ in terms of their active involvement with a category or supplier. We push to reach that point – getting the necessary signatures on time and with all the right terms in place – and then hand off to budget owners or business managers until the contract is up for renewal.

This limited approach to contracts presupposes that the name of the supplier organization and the agreement expiration date are the two most important components of the contract. This assertion might even be true if procurement only established a small number of contracts on behalf of their organization annually. But many procurement teams are involved with dozens or even hundreds of contracts over the course of the year. In the context of contracts, therefore, agility has less to do with the sustained activity level associated with one contract over its term and more to do with repeatability and risk minimization.

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Tackling Three Major Myths about Procurement Automation

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This is the third in a series of articles about procurement automation – a project I’ve been driving using the hashtag #AutoProcure to facilitate open discussion. In Part 1, we looked at the rise of automation, and in Part 2, we took the advice of a Wall Street Journalist and considered the possibility of the ‘bite back’ that seems to inevitably accompany advances in all technology (automation being no exception).

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Supplier Information Management: The Backbone of Effective Supplier Management

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When procurement runs a strategic sourcing project, the selected/awarded suppliers are usually funneled directly into the process of negotiating and redlining the contract. Once the contract is signed, suppliers and internal budget holders go on their way, conducting business as planned until an issue arises or the contract is due for renewal.

While this flow makes perfect sense from a process standpoint, it leaves critical information needs unaddressed at the time when they are the easiest to collect. Procurement commonly puts processes in place to manage suppliers through an entire lifecycle, but Supplier Information Management (SIM) is far less prevalent. Beyond just managing suppliers, procurement needs to centralize and maintain their information in order to be fully engaged throughout a supplier relationship.

The applicability of information is always subject to the circumstances under which it is collected. For example, the information gathered during the sourcing process is about the supplier trying to win business and the buyer looking to assess their capabilities. The information documented in the contract concerns what is expected in the future and how each party will act if circumstances change or expectations are not met. But what about the day to day reality of buying, consuming, and delivering goods and services? This is an entirely different kind of information that deserves a standalone investment.

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Preparing for the Procurement Automation ‘Bite-Back’

AdobeStock unknonwnIn this past Saturday’s Wall Street Journal, there was an article by Greg Ip in which he talked about the innovation ‘bite-back’. That label might not mean anything at first pass, but you’ll get it very quickly with a few examples.

“The cultivation of sugar beets in the 19th century led to vastly more consumption of sugar and a “precipitous increase in tooth decay,” he [Joel Mokyr, a technology historian and economist at Northwestern University] said. When lead was first added to gasoline to improve engine performance in 1921, nobody knew it would eventually be linked to learning disabilities and crime.”

For every meaningful step forward, unintended consequences or side effects threaten to steal the newly won advantage from those who are unprepared. At a very high level, bite-back is like the boardwalk game whac-a-mole. You conquer one challenge, or begin one path towards improvement, only to be pushed back by an unanticipated consequence. Luckily, we don’t need magic or predictive analytics to anticipate where the bite-back is likely to appear.

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