Planning and effective contract management will ensure supply stability and avoid supply complacency. Things change, are you prepared?
Long term system contracts for the supply of standard products and services are a common method to achieve stable supply for a set period of time. Progressive organizations will incorporate in these contracts process for semi or annual review. A review will consider service level conformity to contract as well as price administration. Changes in volume may trigger negotiation of some terms as may be allowed for in the original contract. A spend analysis may identify opportunities for savings and greater supply stability.
Disruptive events will occur that may precipitate a supply crisis to the unprepared. Contingency plans to cover labour disruption, the loss of a key relationship manager or natural disaster that interrupts the chain of supply should be made. Even with our best efforts, not every situation will be anticipated, nor should it be. What is important is that an agreed process to manage disruptive events be addressed in any long term supply contract.
Time is your enemy, time is your friend.
Plan to make time your friend. Organizations that had “shovel ready” projects benefited from the recent time limited stimulus spending on infrastructure projects.
I am all too familiar with end of budget year spending that may not provide the best value to the organization. Annual needs analysis at budget time followed by early consultation with your procurement professional will deliver better value and supply stability – every time.
Complacency with supply contracts is not an option. When knowledge is shared between buyer and supplier, balance of power is maintained. Always know what you buy and when. This knowledge is critical when managing changes in long term supply contracts.
Supply stability is the result of planning, effective contract management and is in everyone’s best interest.
Rusty James Joerin, SCMP is a Supply Chain Management Professional and accredited by the Purchasing Management Association of Canada. He offers procurement services primarily to public sector organizations that do not have a professional supply manager on staff and provides additional capacity to assist with project related supply.
Information about his experience and qualifications may be found at:www.woodsgift.com
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