The task set for procurement leaders in buying groups is to save costs. Whilst that is done at the contract stage, the process of making those cost savings often depends on having the right systems in place.
How do buying groups work?
Buying groups are set up to boost negotiating power where a number of smaller enterprises are typically all dealing with larger suppliers. But it’s not always as straight-forward as being able to agree an advantageous unit price.
Savvy contract managers on the supply side will want some form of purchase commitment in exchange for a cut in their profit margin and, if that isn’t forthcoming, a system of rebates or tiered discounts based on volume over time is usually offered instead.
Added to that, where suppliers want to encourage sales through product mixes, promote bigger volume sales of products reaching the end of their life, or launch new products they will add dimensions like time and product mix as well as volume to determine discounts and rebates.
Clearly buying groups need to be able to quickly and easily consolidate purchases made by each company in the group in order to calculate and distribute (where appropriate) the rebates achieved.
We consider below whether contract management software could be the solution for efficient, compliant, management of supplier agreements in your buying group.
What is contract management software?
Contract management software, as the name implies, is software that is built to help you manage contracts with clients. Plus, it incorporates the whole contract process from contract creation to storage, retrieval, and renewal.
It can also be crucial to the productivity and overall success of an organization. In fact the International Association for Contract and Commercial Management calculated that poor contract management practices are costing businesses an average of 9% of revenues each year.
Benefits of contract management software for your buying group:
With contract management systems boasting increased control, visibility and management of contracts that in turn increases profitability, it’s no surprise that finance and accounting teams in buying groups are being tasked with the job of finding the right contract management software for their group. In fact, a survey published in 2015 by Oxford Economics stated that by 2018 all 1000 procurement executives in their survey expected they would have automated contact management processes in place.
Contract management systems for buying groups support cost savings by:
- automating contract renewal, so no opportunities are missed
- automating invoicing, so that all revenue is claimed
- automatic alerts for contract deadlines
- maximising the efficiency of contract processes, and minimizing contract administration costs
The problem with contract management software for buying groups
Buying groups looking to invest in contract management software tend to have a slightly different set of requirements to other types of buyer. Often, whilst a contract is negotiated centrally, the buying group members place orders directly on the supplier under that contract. This means that there are several legal entities and software systems involved in procurement.
Consolidating purchasing information across a multi-site operation is one thing — collating information from across different systems in different businesses is quite another. That’s not the only difference.
Operationally, suppliers to buying groups tend to offer incentives in the form of rebates, and the cost savings made by buying groups therefore depend on 1) reaching the agreed purchasing levels in order to make claims and 2) accurate, timely processing of rebate claims.
If you can’t model all the complexities of your rebate contract in your contract management system, then you’ll probably resort to tinkering with Excel spreadsheets to fill the gaps. This is fraught with potential error.
And if you can’t capture data from members or suppliers of your buying group, you can’t monitor progress or process claims with any guarantee of accuracy.
Some questions to ask, before you select a contract management system:
- Can you replicate all of the complex volume pricing and rebates in the software?
- How does the software collate timely, accurate data from my multi-site / multi-company group?
- What alerts can be set to help manage contract milestones?
- Is there workflow for approvals and purchases that words across multiple companies within the group?
The contract management software for buying groups: DealTrack
DealTrack Rebate Management System is fast becoming the most popular contact management software alternative for buying groups. Affiliated Distributors (AD), XLVets, Unitas and DCS Group are already leading the way by implementing our rebate management system and realising increased profits and improved cash flow. As a contract management software alternative, the DealTrack rebate management system for buying groups offers:
The ability to manage and model complex contracts with a range of rebates and discounts
The ability to collate and project purchasing requirements across multiple locations
Identification of the best procurement solutions
Full visibility for buyers - targets about to be reached / rebates due / imminent discount tiers
Real-time contract information and automated alerts to buyers and procurement
Instant reports against contracts and rebate claims.
So, is DealTrack the right solution for your buying group? To find out more about the reduced costs that buying groups can realise with DealTrack Rebate Management Software, take a look at the below webinar with Amanda Barnard, Systems Coordinator at Unitas who explains the benefits their buying group realised after implementing a rebate management system.