Spend Under Contract is exactly that…it is the amount spent by an organization that is covered under a contract with a vendor. They are expenses that are actively reviewed and managed internally by a Vendor Management team to ensure that employees are utilizing the contracted rates and terms.
Vendor Management organizations use a set of criteria to determine whether or not the spend with a particular supplier should be governed by a contract. Not all spend needs to be categorized this way. In some cases, a purchase may be conducted outside the standard contracting process to save time. In other cases, a contract may have not been designed to address a unique purchasing requirement.
Whether the intent was to address supplier growth, to meet a unique need, or to circumvent an established process, a significant portion of your indirect expenses may not be covered by a contract. Even if a contract existed, would you know? Could you find it? Procurement managers who can’t find missing contracts are at a significant disadvantage.
- When it comes time to renew agreements, they are in a weaker negotiating position.
- Purchases made outside of a contract can expose their company to risk.
- Bringing more spend under strategic management is impossible.
Making Spend Under Contract a key metric, presents a real opportunity for organizations to take control of their sourcing. Contract-centric sourcing is the new paradigm that enables vendor management organizations to both accelerate their buying processes, improve compliance, and reduce risk. It also allows you to make contract compliance the third pillar by which vendors are evaluated alongside technical and commercial capabilities. Introducing contracts at the very beginning of the sourcing process, businesses can better ensure compliance with buying standards, and accelerate sourcing evaluations. Integrating the contracts with a document management system also provides visibility into past contract performance data. This in turn enables enterprises to create a category strategy that will deliver the most long-term benefits to the company.
The key to remember is that contracts are not bad to have, bad contracts are bad to have.
About Limitless Technology
Limitless Technology, LLC has been managing complex indirect spend and vendor documentation since 2006 for some of the largest companies in the USA saving them millions in costs.
Through our Billing Optimization and Vendor Management Solutions proprietary platforms we utilize technology, processes, expertise, time, and resources to improve our client’s bottom-line.
Limitless Technology manages your vendors, so you can manage and grow your business.
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