Develop Systems to Maximize Savings and Prevent Price Increases
Once your organization has secured savings by implementing a contract with favorable terms, the next step is to maximize savings over time. No matter how great your agreement, price creep will eventually occur. However, you can mitigate this by developing protocols that streamline invoice monitoring and contract management. If your organization has multiple facilities (or departments) in which staff members have purchasing responsibilities, it’s likely that organizational procurement practices have become siloed. As a result, different departments or facilities may have separate contracts with various suppliers, at varying rates, for the same needs. Additionally, staff members are likely making off-list purchases that are not subject to discounted pricing or rebates. There is an opportunity to streamline this process to ensure that all facility contracts are consolidated and serviced by the same vendor (when possible) at a better rate.
One of the most critical aspects of streamlining contracts is to designate one centralized department or facility staff member to maintain current contracts and check supplier invoices for errors, new fees or additional charges. This individual should also keep track of when contracts are set to expire so that they do not automatically renew at a higher rate and to give staff enough time to renegotiate a new contract or start the bidding process, if necessary. We provide the proper training.
Go out to bid every few years to maintain competitive tension
ERA recommends that if you’ve relied on the same supplier for many years, you may have become complacent in this relationship. As a result, your supplier knows that you are unlikely to switch and might not be offering you the most competitive rates. If your contract expires in less than one year, it may be worthwhile to see what other suppliers can offer. Get into the habit of sending out an RFP ahead of when your contract expires and notify your current supplier that your company will be considering additional offers when their contract ends. By introducing new players, it creates competitive tension and gives your current supplier more incentive to provide optimal pricing to keep your business.
Ask suppliers what new technology or services are available
To ensure that your organization is getting the most up to date and valuable services for your money and you are maximize savings, ask your suppliers what new technologies are (or soon will be) available. New equipment, streamlined delivery options, or a new supplier platform (that allows you to track orders or automatically load orders into your accounting software) can make your ordering process more efficient. Additionally, when it takes less time for your staff to reorder products and manage invoices, your organization will save money.