Growing into the Future: Emerging Contract Management Strategies
Presentation Materials
20/01/15 | Contract & Commercial Management | What Lies Ahead?
Dependency on supply networks – 70% of revenue From managing enterprise efficiency to managing market and relationship outcomes
The Environment
Relationships changing – attitudes to risk and collaboration “Honesty and integrity’ key as business attributes Quality of trading relationships – selection and management So what does this mean for ‘commercial management’?
20/01/15 | Contract & Commercial Management | What Lies Ahead?
What Lies Ahead?
Trends we are observing at IACCM
2015 and beyond
20/01/15 | Contract & Commercial Management | What Lies Ahead?
As Markets And Supply Networks Fragment And Diversify
From ‘rules and compliance’ to principles, capabilities and needs
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Business enablement: right suppliers, right customers, right outcomes
20/01/15 | Contract & Commercial Management | What Lies Ahead?
Selection criteria will adjust to measure integrity, agility and to ensure greater cultural fit
Risk And Sustainability Continue To Evolve
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Trading partners will become more integrated
20/01/15 | Contract & Commercial Management | What Lies Ahead?
Commercial Excellence & Contract Management
Commercial Excellence:
Understanding markets and segmentation; sources of value and differentiation; management information; revenue and profit impacts
Contract Management:
Management of change; oversee integrity and performance; deliver commercial outcomes
© 2015 IBM Corporation
IACCM Conference Procurement Contracts Transformation and Technology March 5, 2015
Bob Murphy V.P., Supply Chain & Chief Procurement Officer
© 2015 IBM Corporation 8
Agenda
§ IBM Strategy and Global Procurement
§ Global Procurement Transformation
§ Global Procurement Contracts Transformation
§ Technology Support
© 2014 IBM Corporation 9
Global Procurement is an integral part of IBM’s Strategy
Deliver integration and innovation to clients
Focus on open technologies and high- value solutions
IBM Strategy
Data / Analytics
Engagement: Mobile Social
Security GLOBAL
PROCUREMENT
Cloud
© 2014 IBM Corporation 10
Agenda
§ IBM Strategy and Global Procurement
§ Global Procurement Transformation
§ Global Procurement Contracts Transformation
§ Technology Support
© 2015 IBM Corporation 11
Functional, Geographic “Silos”
IBM Global Procurement Transformation
Horizontal and Integrated
Broad and Deep T-Shape Skills
Common and Distributed
Global and Smarter
Generalists
Inconsistent and Fragmented
Tactical and Administrative
All tied together by a strong Governance Model!
ORGANIZATION
PEOPLE
BEFORE TODAY
PROCESS
TECHNOLOGY
© 2015 IBM Corporation 12
IBM Global Procurement Profile
$52.1B Managed spend
17K Countries 100
$6.9B Annual Cost Savings Contribution
Global Procurement Operations centers 5
Suppliers
© 2015 IBM Corporation 13
Agenda
§ IBM Strategy and Global Procurement
§ Global Procurement Transformation
§ Global Procurement Contracts Transformation
§ Technology Support
© 2015 IBM Corporation 14
Decentralized
Global Procurement Contracts Transformation
Centralized
Global Master Agreement with Supplier
Pre-approved Contract Templates
Shorter contracting cycle
Multiple Agreements with same Supplier
Extensive legal review required
Long contracting cycle
THEN NOW
Short-term Supplier relationships with multiple Suppliers
No central repository
Long-term evergreen Supplier relationships with fewer Suppliers
Contracts Management Tool
© 2015 IBM Corporation 15
Established Contract Templates
Work Authorization
Participation Agreement
Statement of Work
Master/ Base
Partnered with Legal
© 2015 IBM Corporation 16
Established Center of Excellence to Support Select Agreements
Routine Agmts CoE One Process - One Global Team
Centralized Support by Geo Centralized Legal Network
AM – AP - EMEA
Pre - CoE Many processes - Many Teams - Many Owners Ad hoc support of routine agreements by Sourcing
Teams, Hubs, Ops, and CSP
Center of Excellence One Process – One Global Team
Centralized Support
Pre – Center of Excellence Many processes – Many Teams – Many Owners
© 2015 IBM Corporation 17
Managing Contract Risk throughout the Lifecycle
Contract Management Solutions
Contract Initiation and Assembly
Negotiation and
Approvals
Commitment and Obligation
Compliance
Contract Discovery
and Analytics
Audit-ability / Accountability
Manage Mitigate Monitor
© 2015 IBM Corporation 18
Agenda
§ IBM Strategy and Global Procurement
§ Global Procurement Transformation
§ Global Procurement Contracts Transformation
§ Technology Support
© 2015 IBM Corporation
Technology Transformation
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Leverage volume of annual spend
Global visibility to Supplier Contracts
Reporting & Search capabilities
Reduce Interaction with Legal
Reduce Contracting cycle time
© 2015 IBM Corporation 20
Implementation of Contract Management Tool
Global Tool for a Global Organiza:on
Template Library
Global Owners
1000s of Records
© 2015 IBM Corporation 21
IBM Procurement Contract Management Fact Sheet
148K
Agreements Active
28K Countries deployed 100
200 Legal Templates
4K Users Internal
Attachments migrated 625K
Agreements / Amendments Executed 2014
59K
Supplier records
40 Languages
100% utilization
© 2015 IBM Corporation 22
Value Realized from Transformation
Data Analytics
Benefits Opportunities
Contract Management Tool
Leverage Spending
Continuous Transformation
Category Strategy
Strong Governance Model
Consistent Processes
Contract Templates GLOBAL
PROCUREMENT
© 2015 IBM Corporation 23
DEFINE YOUR STRATEGY
DEFINE YOUR PROCESSES
CLARITY IN GOVERNANCE
LEGAL IS A KEY PARTNER
Lessons Learned
TECHNOLOGY
CONTINUOUS IMPROVEMENTS
© 2015 IBM Corporation 24
Contracts becoming Social….
© 2015 IBM Corporation 25
People
Talent ACrac:on
Innova:on
Technology
Compe::ve Advantage
Business Impact
Security of Supply
Reputa:onal Risk
Sustainable Cost Management
Regula:on & Audit
Where are we heading to?
© 2015 IBM Corporation 26
Questions?
© 2014 IBM Corporation 27
State of Flux Presentation Contract Management
© 2012 IBM Corporation
Agenda
§ About State of Flux
§ 2014 global SRM research – contract and performance management results
§ Contract lifecycle management (CLM) overview
§ State of Flux CLM diagnostic tool
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© 2012 IBM Corporation
State of Flux is a global procurement and supply chain consultancy
Headquartered in London, UK, State of Flux works closely with its multinational clients to help upgrade their procurement and supply chain capabilities, drive best practice and deliver superior business performance. Our service offerings include:
§ Supplier management
§ Category management and strategic sourcing
§ Contract lifecycle management
We have an extensive list of multinational clients, including Unilever, Barclays and McLaren Automotive. As well as our consulting services, we offer training and an award-winning Supplier Management Platform.
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© 2012 IBM Corporation
Six years of research into supplier relationship management (SRM)
2014
2014 GLOBAL SRM RESEARCH REPORT
(Publication November 2014)
© 2012 IBM Corporation
Increasing number of survey respondents over the years
314 companies
224 companies
2012
2013 505 companies
2014
© 2012 IBM Corporation
Still room for improvement in performance and contract management
For what proportion of your key supplier group would you consider you have robust performance management in place?
For what proportion of your key supplier group would you consider you have robust contract management in place?
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10%
31%
18%
21%
19%
0% 5% 10% 15% 20% 25% 30% 35%
Don’t know
0 - 25%
26% - 50%
51% - 75%
76% - 100%
10%
22%
18%
23%
28%
0% 5% 10% 15% 20% 25% 30%
Don’t know
0 - 25%
26% - 50%
51% - 75%
76% - 100%
Very similar figures to 2013
© 2012 IBM Corporation
Contract and performance management – most widely used areas in SRM technology
For which areas do you currently have an IT system / software application?
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58% 41%
36% 29%
28% 27%
23% 22%
20% 15%
9% 8%
6%
0% 10% 20% 30% 40% 50% 60% 70%
Contract management Performance management
Forecasting and planning Project management
Risk management Benefits capture and reporting
Quality management Category management
Relationship management and collaboration CSR / sustainability management
Product lifecycle management (PLM) Other (please specify)
Innovation management
© 2012 IBM Corporation
What is contract lifecycle management?
The proactive management of external supplier contracts throughout their life, from initiation to execution, administration and analysis.
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© 2012 IBM Corporation
There are five stages to the State of Flux contract lifecycle
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© 2012 IBM Corporation
What does ‘best practice’ CLM look like?
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Processes
Creation
Sign off
Physical design
Uploading
Updating
SPM / SRM
TOM People Design + build Process
3 weeks
Data model
Reporting Fields to be tracked
6-8 weeks
Technology Discovery collection (30,000)
Segmentation Cleanse
12,500
WATSON WATSON
People
Job Design Description
Training
© 2012 IBM Corporation
What does ‘best practice’ CLM look like?
Process
§ Complete process – covers entire contract lifecycle, from creation to renewal and analysis.
§ Clear communication – defined by clear flow charts and communicated to all impacted stakeholders.
§ Effective engagement – involves representatives from all appropriate functions.
§ Continuous improvement – regular process compliance audits fed into ongoing improvement programme.
§ Clear exception process – deviations from standard clauses and contract language are captured, reviewed and approved by appropriate personnel.
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© 2012 IBM Corporation
What does ‘best practice’ CLM look like?
People
§ Clear roles and responsibilities – clearly defined roles communicated to all of those involved in the process.
§ Effective training – adequate, timely and up-to-date training for all impacted individuals on roles, policy, tools and systems.
§ Clear motive – all impacted individuals informed of why the process is important and valuable to their role and the wider business.
§ Suitable competencies – appropriate resources obtained for various roles within the process.
§ Compliance management – clear process owner accountable for reporting on process and policy compliance.
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© 2015 IBM Corporation 40
Contract Lifecycle
Mgmt
Business Insights
User Experience
Security & Configurability
Post Contract
Pre Contract
External Party Qualification
Contract Creation to Execution
Obligations Management
Relationship Management
Contract Lifecycle Management – Enabling Technologies
Compliance Management
Administration
Renewal Management IBM CONFIDENTIAL
© 2015 IBM Corporation
Emptoris – UX Redesign § Leveraging IBM Design Thinking team, developing simplified use cases, personas, and
“hills” for focused UX improvement [Who, What, WOW!]
§ Working closely with sponsored users in driving the new design
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Before After
IBM CONFIDENTIAL
© 2015 IBM Corporation
Contract Management Dashboard and Editor Screen
42 IBM CONFIDENTIAL
© 2015 IBM Corporation
Search and Preview
43 IBM CONFIDENTIAL
© 2015 IBM Corporation
Responsive Design – identifies and formats based upon device type
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Tablet Mobile
IBM CONFIDENTIAL
© 2015 IBM Corporation 45 IBM CONFIDENTIAL
© 2015 IBM Corporation 46 IBM CONFIDENTIAL
© 2015 IBM Corporation 47
Problem Impact Solution
Missed Dates - Higher contracting costs - Penalties incurred Milestone Dates
Late Payments - Missed discounts - Discount never received altogether
Discount/Payment Schedule
SLA’s Not Met - Delayed projects - Operational impact
Deliverables & Commitments
Late Renewals Added fees & penalties Expiration & Renewals
Lack of Visibility Poor compliance to contracted terms Business Reviews
Certifications Expire Increased risk and exposure Supplier Management
Contract Obligation Management
IBM CONFIDENTIAL
© 2015 IBM Corporation 48
Contract Obligation Management
Alerts
Action: Review
Action: Create/Update
Author
Review
Approve
Negotiate Execute
Manage
Amend
Manage
IBM CONFIDENTIAL