5 Ways to Disrupt Current Contract Terms and Drive Greater Value

“Every threat to the status quo is an opportunity in disguise.” Jay Samit

There is often substantial value mining success in the disruption of the status quo. This concept is demonstratively tactile in reference to contract term review.

Here are five strategic disruptions to challenge static value generation hidden in your Strategic Sourcing contract terms.

The First Disruption – Functional Equivalent Value: Contracts that have multiple, equivalent suppliers or service providers.

The Second Disruption – Stasis Disruption: Agreements older than 3-years, above market rate or at “list price”, and contracts that have lapsed into evergreen or have pending evergreen clause executions.

The Third Disruption – Legacy Disruption: Local services that have not had contract performance review in more than 2 years due to local or regulatory concerns.

The Fourth Disruption – Unfavorable Term Interruption: Agreements with existing unfavorable terms – ex.: evergreen clauses, early termination or buy-out restrictions, unfavorable venue, price escalators that are unfavorable to current market, and rebates that replace current market-rate discounts. (You will want to negotiate these away ASAP).

The Fifth Disruption – Purchased Service MarketPlace Virtual Consolidation: Service supplier segments where consolidating contracts into similar expense “portfolio” groups of like services will escalate your organization’s buying power once consolidated into a single marketplace offering. Top 4 examples are commonly:

• rental car, hotel, travel agent and airfare into a “travel” portfolio,
• onsite quick-print shops, laser printers, labels, convenience copiers, pre-printed and e-forms corporate identity printing (envelopes, business cards, appointment cards), and even corporate swag company store hosted printing services, into a “print management” portfolio,
• locum, traveler, temp agency, mobile clinical services, all outsourced labor agreements, into a “managed labor services” portfolio,
• clinical equipment and facility management service agreements.

I am assuming we are all evolved supply chain professionals, and pursue the disruptions with all due collaboration and in a kind and generous manner with our marketplace colleagues… Yet still shining a bright and competent light on all areas of opportunity is, after all, a primary value that your organization is depending on us to provide.

As always, until next we meet, I appreciate all you do to fill the hands that heal!

TH

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