Procurement & Contract Management

Many companies are now spending a larger percentage of their revenue on products and services than they were thirty years ago. Most manufacturers spend around 60% to 70% of their revenue on the supplies that are necessary to keep their business running.

As such companies are now looking for ways to boost their bottom line through non-traditional approaches. Cutting cost and cringing on spending is no longer the only way out of the morass. New ways have to be found, tested and implemented.

A strategic approach to procurement with a win-win solution looks at cost as a responsibility of all parties involved. Identifying cost drivers in the buyer-seller relationships, reducing non-value adding activities, eliminating arbitrary costing and seeking value adding activities would result in a stronger and longer-term business relationships.

To make a significant impact to the organization’s future success, procurement’s contribution has to be reviewed for process improvement and cost efficiencies by transforming ad hoc spending into a more structured approach through contracting initiatives.

Contract management and the outsourcing of goods and services, though provides benefits, is complicated and needs close attention and scrutiny.

Business organizations are embarking on airtight agreements to eliminate risks that could be managed. A written document that precisely spells out commitments and obligations of each party in a business relationship is the norm now. This written document – a contract, is a complicated, disciplined approach to outline, identify, manage and control the business relationship for mutual benefits of all parties involved.

The document is written in precise language to avoid ambiguity and misinterpretations. Any business relationship will encounter challenging situations that may need immediate solutions. However, not all solutions will benefit everyone involved. A contract, then, has to address these and minimize risks and assign responsibilities.

Learning Outcomes:

• Display the ability to interpret what life cycle costing and total cost of ownership is
• Explain what supplier risk analysis is and classify risk categories
• Construct a supplier selection process
• Analyze and interpret procurement contracts and its legal obligations
• Comply to tender requirements