As a procurement professional, your role has evolved over time and will continue to do so.
Nonetheless, you will always need to do everything in your power to keep costs down. Of course, this means ensuring every new procurement contract has the best terms possible. However, you cannot afford to disregard your existing contracts as they may also hold the key to hefty savings.
As such, re-examining them every once in a while is a crucial cost-cutting measure. This holds particularly true for any long-term contracts your company may have signed.
Unfortunately, many procurement managers don’t have a habit of doing this. In fact, 83% of them won’t challenge their suppliers with regard to the terms of their contracts. This is a huge cost-reduction opportunity that’s being wasted. As a result, your company may be leaving a lot of money on the table.
Think of it this way. If you signed a big contract with a supplier two years ago, your relationship isn’t the same now as it was back then. You’ve become a loyal customer and a stable source of revenue in the meantime. It is only natural that the terms of the contract should reflect this change going forward.
In addition, the market conditions may no longer be the same. The prices may have changed or a new supplier could have entered the picture. In essence, you need to compare the current conditions with those at the time when you signed the contract. Then, if your existing agreement is no longer giving you the best deal possible, it’s time to try and renegotiate the deal.
Of course, this can also work in the opposite direction. Specifically, the new market conditions may put your supplier in a stronger negotiating position. Even then, it’s crucial to carefully examine those contracts. This will allow you to know when to let sleeping dogs lie.
Examining existing contracts is just one tool successful companies use. To learn more about this reach out to the team today.