In the previous blog post we discussed how creating contract repositories can help track contract expiration, any other important clauses with respect to commodity prices or help avoid unintended contract renewals. It also helps in tracking contract compliance.
Today we will discuss step 4 – MANAGE CONTRACT METRICS
To ensure maximum operational and financial performance and minimize risk it is necessary to effectively manage and track contracts. A correct metric can prove to be a powerful means for extracting greater mutual business value from a sourcing arrangement. An ideal metric should take into consideration the following;
- It should be in tune with organizational objectives
- The objectives should be measurable
- Must include operational metrics for instance how much of the contract was utilized from contract made for 1000 laptops
- Set realistic targets
- The metric should be flexible to accommodate for any fluctuations
- The objective of the metric should be clearly defined
Learn More: Zycus iContract Solution
Ensure that the Service Level Agreements are well-defined in the contracts and setup processes to measure supplier\’s Key Performance Indicators by,
- Linking contracts to spend
- Establishing benchmark parameters with regards to peers and industry
- Tracking and measuring contract compliance and utilization based on these parameters and benchmarks
- Communicating and eliciting inputs from concerned decision makers while determining performance parameters
Stay tuned to know about the last step to manage contract effectively.