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Eight Ways to Boost Supplier Contract Management in Mexico
Discover best practices for creating a strategy for supplier contract management in Mexico to identify supplier gaps and drive savings.
In an increasingly interconnected world, the old saying takes on more meaning than ever: no company is an island. To meet changing customer expectations, deliver high-quality products, and grow business, all companies must rely on a growing ecosystem of supply partners. From maintaining office supplies to implementing software, managing facilities, or fully assembling products suppliers are vital to business success. An effective strategy for undertaking contract management in Mexico is increasingly important for ensuring success.
As globally active companies need more and more suppliers to keep the business running smoothly, strategic sourcing and sourcing managers in Mexico face the challenge of effectively organizing and managing supplier contracts.
Although sourcing teams recognize that a comprehensive strategy for supplier contract management in Mexico saves time and money, most companies continue to operate sub-optimally through ad hoc and case-by-case processes. However, in the changing world of supplier management, the old way of managing contracts will no longer suffice. In this blog post, we’ll dive deeper into supplier contract management to give you and your team practical ways to boost your own contract management.
What is supplier contract management in Mexico?
Supplier contract management in Mexico is an essential element of contract lifecycle management and is the process by which procurement teams collaborate with suppliers within and outside of Mexico to meet business objectives. Although many believe that contract management involves only the signing of documents, it goes far beyond making the agreements themselves.
Before even entering into contract negotiations, strategic sourcing and sourcing managers in Mexico must first find the best suppliers for their needs. This is typically done through a request for proposals (RFP) process, which involves carefully evaluating different options to find the best partners. Once a supplier is chosen, teams will begin contract negotiations to define the products or services to be supplied, the duration of the agreement, payment terms, and renewal options, among other aspects.
Digital contract management helps teams regain their negotiating power and drive more successful business outcomes.
After each contract is signed, strategic sourcing teams must track supplier performance and ensure that the supplier is meeting its contractual obligations. Additionally, sourcing and procurement teams must stay aware of ongoing deals to stay ahead of unexpected renewals and deadlines. Traditionally, supplier contract management in Mexico has been a manual process with contracts stored in isolation on different computers, shared drives, and desk drawers. This ad hoc system often leaves procurement professionals having to deal with long email chains and inefficient systems for finding important contract information. Without clear visibility into contract data, many sourcing teams risk losing influence and a lot of money in the process.
Eight Best Practices for Supplier Contract Management
Strategic contract management in Mexico is a fundamental element for procurement managers who want to promote the role of procurement in the company. When sourcing and procurement managers have access to their contract data, they can better identify gaps, find savings opportunities, and expand collaborations with their strategic suppliers. Here are some of the ways companies can take supplier contract management in Mexico from a tactical exercise to a strategic opportunity:
- Proactively engage with key stakeholders. Partners such as finance, legal, and technology teams are often used late in the contracting process. This state of affairs can lead to negotiations stalling or even deals breaking down. It is essential to meet with these stakeholders before entering into discussions with suppliers to understand the financial, compliance, and data privacy requirements that suppliers must meet before collaborating with the company.
- Set performance expectations early. To avoid early contract terminations or unsatisfactory collaborations, be clear about performance expectations from the beginning. Sharing evaluation criteria during the procurement process will not only help weed out vendors who may not meet company standards, but it will also help establish transparency between the team, vendors, and stakeholders. This type of visibility allows companies to create solid and very effective collaborations.
- Centralize contract data. One of the biggest obstacles to strategic contract management in Mexico is the lack of visibility into supplier data. Procurement managers need to know upcoming renewals, payment terms, and contractual obligations so they can see everything and plan for the future. Without a clear view of how resources are allocated or when contracts end, procurement managers risk missing important savings opportunities. However, centralizing data provides the visibility needed to solve this problem to make better contract decisions and reduce wasted spending.
- Create a hub for collaboration. The procurement and supply teams are the link between the company and its suppliers. Therefore, they often act as intermediaries, passing communications from interested parties to suppliers and vice versa. However, being the middleman is ineffective and distances sourcing and sourcing teams from more strategic initiatives, such as identifying inappropriate spending and evaluating supplier performance. By providing a centralized communication hub, the procurement team can directly connect stakeholders with suppliers and ensure that essential information reaches the right people at the right time.
- Establish approval workflows. Contracts often get stuck in the process because the necessary stakeholders have not approved them or, in some cases, have not even seen them. Strategic sourcing teams that clearly know the necessary approvers can save time with standardized workflows that automatically route contracts through all necessary approvals.
- Develop a periodic review of contracts. When contracts are left unattended, unexpected deadlines occur. Setting up weekly or monthly reviews of all contracts can help companies and their teams keep track of what needs immediate attention and prepare for upcoming renewals and performance reviews.
- Connect supplier contract management to overall business objectives. Sourcing can become a more strategic partner for a company by demonstrating how supplier contract management in Mexico directly impacts the bottom line. Procurement managers with easy access to supplier contract data can use this information to make better decisions about risk mitigation, resource allocation, and project prioritization. Additionally, by having more insights into overall contractual spending, sourcing, and sourcing teams can better report on overall savings and identify opportunities to strengthen supplier collaborations across the enterprise.
- Prioritize strong relationships over financial value. Procurement managers around the world agree: that cost savings are no longer the only and main objective. To maintain business continuity amid supply chain volatility and disruption caused by the pandemic, many strategic sourcing and sourcing teams rely on their close collaborations with suppliers. Instead of looking for the best deal for a company, mutually beneficial conditions to create lasting relationships should be considered.
Supplier contract management is evolving
It is clear that conventional supplier contract management in Mexico will no longer be sufficient, as companies continue to depend on a greater number of supplier partners. To support business objectives and maintain business continuity, procurement, and sourcing teams must leverage their contract data to drive savings, track renewals and deadlines, and ensure compliance with their contractual obligations.
Without a dedicated contract management strategy, essential information such as agreement lengths, renewal dates, and deadlines can get lost in the shuffle. In order to avoid these problems, companies are increasingly turning to digital contract management systems that automatically centralize data and provide a collaboration center.
This optimized visibility allows company sourcing teams to identify strategic suppliers and manage relationships across the enterprise. In addition to achieving greater supplier visibility, strategic contract management in Mexico also helps sourcing professionals understand their companies’ total spending, as well as fill supplier gaps that cause costly expense losses.