Best Practices: Driving Compliance to Your Supplier Agreement

By: CovestAdmin
May 7, 2024
When considering signing a new supplier agreement, one of the most important and crucial aspects is the purchasing organization’s ability to drive compliance to the contract. Whether an organization chooses to source directly or seeks third-party support from a Group Purchasing Organization (GPO), the success of a new program hinges the foundation of the contract and how well it is implemented internally.  However, before you can dive into the different aspects that help drive compliance, your organization needs to establish the most essential piece: a firm Supplier contract. With CoVest’s ongoing management of supplier relationships, core list management, continuous price checking in the market, leveraged volume, and implementation support, Members enjoy more than just strong agreements. From MRO to office programs, here are eight best practice tips for successful implementation and contract compliance.

1. Do the Pricing Work and Analysis Up Front

A solid data-driven foundation must be established to properly drive compliance between an organization and their supplier agreement. Gathering data is difficult. Prior to signing a new supplier agreement, CoVest works with Members to gather GL data, then assesses and categorizes the spend, outlining spend that can be captured effectively and pulled under our supplier agreement. Location-based data is particularly important for enterprise organizations to better pinpoint areas of spend improvement. This upfront pricing and savings analysis provides meticulously cross-referenced products, recent and accurate baseline data, and the necessary tools to measure compliance throughout year one savings and beyond.

 

2. Spread Awareness of the New Program

One of the hallmarks to a successful program rollout is communication. Ensuring the site buyers are acquainted with the transition of suppliers is essential to creating the buy in to promote change. The best way to do so is a combination of digital and in person educational materials. Some examples are:

      • Marketing materials – Work with the suppliers to obtain material that outlines the program, benefits, and FAQs.
      • Site kickoff meeting – Have a supplier representative visit sites to introduce the program, describe the new process, and answer any outstanding questions.
      • Endorsement letter – This letter introduces the new supplier and your organization’s intention to buy specific materials within certain categories from the supplier. This letter should be endorsed by the organization’s influential leads and stakeholders to emphasize buy-in across all business units and buyers.

3. Educate Sites and Buyers on the Cost Savings Oppourunities and Benefits of the New Program

To promote change within an organization, you need to be asking “Why?” Often, sites may be hesitant to change an incumbent process that appears to besuccessful in supporting company goals. To better understand why a change may be needed, benefits and savings must be clearly conveyed to management and site buyers. As mentioned above, endorsement letters and marketing materials can outline program benefits outside of the savings outlined in the pricing analysis process. Once the program is up and running, compliance reports and savings reports will reinforce the savings accrued as well as further opportunities for improvement.

 

4. Make it Simple for End Users to Place Orders

Supplier transition will not be possible if the SAP system or supplier login portal is not set up properly and earlier in the process. After ensuring the technology is in place to order from the new supplier’s system, account set up should occur at every site. The final step is to confirm the end users have access to the system and understand the new process. At CoVest, we ensure the suppliers have been engaged with the Member during the setup, which guarantees the end users are well versed in placing orders through educational kickoff meetings and emailed materials.

 

5. Confirm Vendor Communication Is Where It Needs to Be

The vendor needs to be engaged with the organization at every level from the top down. At the corporate level, the vendor needs to be aligned on program expectations and get the buy in of upper management to encourage future success. But, with the product ordering taking place at a local level, all the national buy in will not make a difference without site communication. Suppliers will often assign a representative in the site’s vicinity to allow for face-to-face interaction and support where needed.

 

6. Ensure the Supplier Is Meeting the Organization’s Standards and Serivce Level Expectations

Although the contract agreement is in place at this point, it is vital to ensure their needs are being fully met. Things to check:

      • Audit pricing– Has the agreed upon pricing been loaded into the system to maximize savings?
      • Quality of products – Is the organization satisfied by the performance of the commodities?
      • Service levels – Can the organization get support from the supplier when needed?
      • Delivery schedules – Are products arriving as expected?
      • VMI programs – Are continually ordered commodities transitioned to a hands-off system?
      • Overall performance expectations – What does the successful rollout of the program look like?

      7. Implement Strong Internal Controls and Guidelines

      The impact of the benefits of supplier agreements relies heavily, but not completely, on the awareness, education, and acceptance by the organization’s employees. However, procedures can be implemented to start saving immediately without the need for human intervention and depending on the level of compliance the organization hopes to achieve:

          • Vending programs – Stock site floors with vending machines with approved CoVest supplier items.
          • VMI programs – Partner with the supplier to have them manage the reordering of products.
          • OA lists – Limit the products that site buyers can order by controlling the goods they are able to order.

        8. Continuously Monitor and Review Compliance Reports

        Once a program has been implemented, that does not mean the work is finished. As the liaison between the two entities, CoVest tracks the Member buying data against expectations to identify gaps. These gaps can look like sites not ramping up spending with the preferred supplier or not participating in the program at all. Then, actions can be taken in the form of reimplementation meetings or site visits to drive compliance to a more appropriate level.

         

        Help From Implementation Experts 

        At CoVest we cover a large range of MRO, Facility, Office Supplies and Services.  These are broad and encompassing categories for manufacturers in particular and often have significant, unmanaged tail spend. Outsourcing this category and utilizing a GPO can leverage your spend with similar profile organizations to provide substantial savings, a streamlined process, and deep analytics for ongoing saving opportunities from compliance levels, alternative product identification and much more. Our dedicated team of implementation professionals have the experience of how to navigate the contracting, implementation, and ongoing compliance support to provide continuous savings and management of your program.

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