Analysis: How Procurement Teams Demonstrate ROI. Second Part

In my last post, I talked about the results of an Iasta Efficio survey that showed the two top priorities for sourcing teams in 2014 were:

  1. Increase the rate of cost savings (identified and realized)
  2. Drive wider operational efficiencies through procurement

Previously we discussed the benefits and importance of having tools and methods to reporting on savings Analysis: How Procurement Teams Demonstrate ROI. First Part. Now we’re ready to move on to the second priority.

Priority # 2: Drive wider operational efficiencies through procurement

As we’ve already discussed, tracking spending from contracts is a key factor in tracking savings, but the relationship between effective sourcing and contract management goes beyond savings. Bridging the communication and process gap between procurement and contract management is a key way procurement teams can drive operational efficiency and demonstrate how sourcing is directly tied to business decisions and their long-term financial impact on departments across the company.

In a recently published white paper titled Creating Strategic Value from Contract Management, Patrick Stakenas, Chief Strategy Officer at Selectica, discusses how “companies are adding more value by using an enterprise-centric strategy.” Stakenas approaches CLM from a financial and process perspective. Working for a company that sells solutions for supply management and contracts lifecycle management, I know how intertwined the disciplines of contract management and strategic sourcing are so I expected to see lots of connections between the two, but I was truly surprised to see the extent of overlap between CLM goals and strategic sourcing goals.

Here are a just a few additional points that are called out in the white paper:

  • Companies are failing to unlock the savings contained in contracts
  • Monitor and manage signed contracts to ensure contracts are executed properly
  • Incorporate what worked well into contract renewals and replace or exclude elements that hindered business
  • Avoid duplicate contracts that reflect different prices and payment terms and may not leverage negotiated discounts
  • Contract review process that includes controls on changes to certain clauses ensures that elements that offer the company significant competitive advantages are not modified during the negotiation process

Let software solutions do the heavy lifting for you

If you want an easier way to demonstrate ROI or show success on performance metrics, you may want to take a second look at your software solutions. Some of the most important advantages of using full-featured software solutions over manual methods for sourcing, spend analysis, and contract management are the ability to standardize processes, close the communication loop between different processes and different teams, and provide easy and accurate reporting enterprise-wide.