Presidents Message: September 2017
Late August, early September for some, is back to school for kiddos of all ages. It’s also a good time for Procurement and Supply Chain professionals to work on their reading, writing, and arithmetic.
Reading. Re-evaluate the legal language used with strategic suppliers. Are you using contracts? Purchase order terms and conditions? No terms and conditions at all? Read each legal document in the context of how it applies to each supplier. Are you using standard terms when custom terms may be more appropriate? Are there any gaps in how your organization’s risk is managed? Are any agreements expired and in need of renewal to maintain the appropriate level of protection and supply continuity for your organization?
Writing. Look at all communications and instructions your procurement department provides to internal customers and suppliers. Think about things like your procurement SOP’s, your procurement department’s website, internal training and processes, etc. Are any elements of those communications outdated or incorrect? Are all those communications as clear as they can be? Is there new information that should be added to reflect recent changes in your procurement practices?
Arithmetic. Are there supplier relationships where you’ve historically trusted suppliers to raise their prices proportionally to their cost increases? If so, consider applying fair index-based price adjustment formulas to those relationships, ideally within a contract. Do you calculate and report spend based on assumptions made at the beginning of the year, like estimated purchase volume? If so, it might be a good time of the year to see if actual data is consistent with your assumptions or if recalculations are required? How about cost reductions? The indexes and volume calculations work the same way – have prices dropped on an index, are you consuming far greater than forecast. Has your supplier made manufacturing improvements yielding a ‘%’ cost reduction – have you realized this reduction from your supplier?
Think about other ways you can use the 3 R’s above: Reading, Riting and Rithmetic, J. Ok, so perhaps Rithmetic is a stretch on the R…
(Shared content from NLPA)
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