Contract Management Business Services Support Training Course

DELIVERED BY: Business Services Support Limited Visit www.businessservicessupport.com Tel: 0845 226 4315

OBJECTIVES
PROVIDE PARTICIPANTS WITH SKILLS FOR EFFECTIVE CONTRACT MANAGEMENT PROVIDE A BASIS TO ENABLE THE ORGANSIATION TO ACHIEVE STRATEGIC PROCUREMENT GOALS

PROVIDE PARTICIPANTS WITH AN INSIGHT TO THE LEGAL, HUMAN & COMMERCIAL ISSUES ASSOCIATED WITH A LEGALLY BINDING CONTRACT
PROVIDE PARTICIPANTS WITH STEPS FOR DESIGNING & DEVELOPING ROBUST PERFORMANCE MANAGEMENT SYSTEMS
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STRUCTURE & OUTLINE

Supplier performance is crucial to an organisation
A supplier that performs well can:

Help your organisation be more efficient Produce higher quality products or services

Reduce costs, and increase profits

Disrupt your operations Make your organisation fail in the eyes of our customers

A supplier that performs poorly can:

Increase your costs, and threaten your profits

Managing the performance of suppliers, then, should be a strategic focus of every organisation Yet, it is unbelievable how many organisations fail to recognise the importance of supplier management
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STRUCTURE & OUTLINE

Very few companies have formalised systems in place to measure their suppliers performance And fewer companies have a strategy to motivate suppliers to improve their performance This course will teach you how to measure your suppliers performance and how to achieve optimal supplier performance

After this course, you will have enough knowledge to implement a supplier measurement and management program at your organisation
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KEY OUTCOMES
CREATING AND DEVELOPING A TEAM CULTURE LEGAL & COMMERCIAL AWARENESS COMMUNICATIONS STRATEGY NEGOTIATION SKILLS DURING THE PROCESS ONGOING MONITORING OF PERFORMANCE
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PEOPLE IMPLICATIONS?
ROLE OF THE CONTRACT MANAGER:
Once a contract is awarded, the contract manager will agree budgets and timescales, and gain approval of costs and processes. Throughout the life of a project the contract manager will act as the main point of contact.
The exact nature of the work will depend on the size of the

employing organisation, but key processes would involve the following:

Meet with clients to gain a full understanding of their business and needs; Present project proposals to client; Maintain communications with in-house departments and external contractors;

Make improvements to contract

processes and procedures

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LEGAL IMPLICATIONS?
COMMERCIAL VS LEGAL IMPLICATIONS:

There are literally thousands of different clauses that can be applied and most are dependant on the type of contract Contract clauses are usually small statements within the contract.

These clauses can work to the detriment of other statements made within the contract and can be used to limit any liability or obligation on the part of the person offering a service

In many contracts there are clauses known as penalty clauses

These clauses are designed so that when a party breaches a

contract a financial penalty can be applied

One of the main reasons behind this type of clause is that if a

contract is breached then the non breaching party will be able to claim a financial penalty without taking the dispute to court
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WHY CONTRACT MANAGEMENT?

Three Key Elements:

Measuring your suppliers performance involves implementing a supplier rating program at your organisation A supplier rating program can be simple or complex, manual or electronic. You will need to decide the option that works well for you Well call SUPPLIERS, RATERS, and PERFORMANCE measures the three key elements of a supplier rating program The suppliers, raters, and performance measures that you decide upon for your supplier rating program are critical to the success of your program

We will talk about each of these three key elements now

Suppliers

Raters

Performance

Supplier Rating Program

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WHY CONTRACT MANAGEMENT?

ELEMENT ONE: SUPPLIERS

When selecting the suppliers to evaluate, you have to determine a reasonable number of suppliers

It is usually not worthwhile to evaluate suppliers who receive few orders from you or with whom you do not spend a great deal of money

Whatever number of suppliers you choose, the group of chosen suppliers should include:

(a) Those suppliers with whom you spend a lot of money (b) Those suppliers who have the most impact on your operations Determining what is meant by "suppliers with whom you spend a lot of money" and "suppliers who have the most impact on your operations" is subjective and can vary from organisation to organization

Here are some guidelines to help you determine the suppliers who meet these criteria in your organisation
Suppliers Raters Performance Supplier Rating Program

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WHY CONTRACT MANAGEMENT?

ELEMENT ONE: HIGH SPEND SUPPLIERS

For spending, lets default to the time-honoured 80-20 rule As it would apply to suppliers, 80% of your spend is with 20% of your suppliers Find out your total spend and the amount you spend with each supplier

Sort your list of suppliers from highest spend to lowest spend. Is the spend with the supplier at the top of the list equal to or greater than 80% of your total spend?
If not, add the spend with the first supplier to the spend with the second supplier. Is the sum equal to or greater than 80% of your total spend? If not, add one supplier at a time (in order) until the combined spend is approximately 80% Your supplier rating program should probably include these suppliers unless your company does not follow this pattern and it takes more than 20% of your suppliers to account for 80% of your spend

Suppliers

Raters

Performance

Supplier Rating Program

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WHY CONTRACT MANAGEMENT?

ELEMENT ONE: HIGH IMPACT SUPPLIERS

For impact on operations, ask yourself the following questions about each of your key suppliers: If this supplier delivered late, would it shut my companys production line down? If this supplier delivered late, would my company be unable to meet its obligations to its customers or otherwise lose sales?

If this supplier provided a product or service that was of unacceptable quality, would it shut my companys production line down?
If this supplier provided a product or service that was of Supplier Suppliers Raters Performance Rating unacceptable quality, would it result in a failureProgram of my company to meet the quality standards of its customers?
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WHY CONTRACT MANAGEMENT?

ELEMENT ONE: HIGH IMPACT SUPPLIERS (CONTINUED)

If this supplier raised prices, would my company continue to purchase the same products or services from that supplier, resulting in a reduction of profit? If this supplier provided poor service (e.g., failure to promptly answer a question), would it result in my company providing unacceptably poor service to its customers (e.g., failing to promptly answer a customers question)? If you have answered "yes" to any of these questions for a supplier, that supplier should be included in your supplier ratings program

After reviewing these questions, you probably get the idea for the type of questions to ask about suppliers
Because you know your business better than any third party, feel free to create your own type of questions to determine whether a supplier has a significant impact on your operations
Suppliers Raters Performance Supplier Rating Program

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REVIEW?

ROLE PLAY

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WHY CONTRACT MANAGEMENT?

ELEMENT TWO: RATERS

The next key element to decide upon is the raters who are the individuals who will participate in the evaluation of your suppliers? Obviously, your organisations purchasing and supply management staff should participate because that staff is ultimately responsible for the performance of your suppliers But do not stop there! It is extremely important to get the input of other stakeholders in the organisation If you work in a production environment, be sure to involve your engineers and quality staff These folks have a vested interest in the performance of your companys product or service and usually are more than happy to give their opinions on how well suppliers support their goals
Supplier Rating Program

Suppliers

Raters

Performance

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FRAMEWORK FOR MANAGING CONTRACTS (K.P.Is)

SUPPLIER SCORECARD:

Supplier scorecards are a common starting point for organisations who wish to have some method of rating their suppliers

The supplier scorecard approach gained popularity in the 1980s

Each rater will receive one scorecard for each supplier being evaluated Each scorecard represents a survey of the raters opinion of that suppliers proficiency for the selected performance measures

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WORKING TOWARD IMPROVING SUPPLIER RELATIONSHIPS

Working toward improving supplier relationships:

An example of these three points being formalised in the resolution of a quality problem is:
a) b) c)

The supplier will have its production machinery recalibrated By Monday of next week That the supplier will test the first 10 components produced for you prior to shipping to ensure that they function in accordance with contractual tolerances

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WORKING TOWARD IMPROVING SUPPLIER RELATIONSHIPS

Working toward improving supplier relationships:

If your efforts to correct performance problems through collaboration fail, you should seek to replace your poorly performing supplier with one who can meet your expectations However, it is never safe to assume that switching suppliers eliminates problems

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WORKING TOWARD IMPROVING SUPPLIER RELATIONSHIPS

Working toward improving supplier relationships:

You may end up with the same or worse problems when switching suppliers Always perform due diligence and ask prospective replacement suppliers with evidence that they are better than your incumbent Evidence can include customer testimonials, on-site demonstrations, product samples, and so forth

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