Procurement professionals know that the best way to get more value from negotiated contracts is to put more of your spend through them. But communicating that value to end-users can often be a challenge. Many end-users either don’t fully realize the advantages in sticking to the approved contracts, or they may not know they’re breaking the rules at all.
How can you get your staff to comply with the contracts you’ve put in place? Chris Sawchuk, a principal and Global Procurement Advisory Practice Leader at management consultancy The Hackett Group, explains.
Establish a Policy, Not a Preference
To promote vendor compliance, present it as a rule. Some companies make the mistake of presenting a vendor contract as a preference or a suggestion. Even the use of the common wording “Preferred Supplier” can signal to employees that it is acceptable if they go around it.
“Make it explicit — for instance, X company is our supplier within Y category, and you’re expected to buy from them going forward,” Sawchuk says. “That eliminates ambiguity.”
These mandates typically work best when employees are involved in supplier decisions. “You may not be able to include everyone,” Sawchuk explains. “But involving someone from each relevant department may be enough to keep employees in the loop.”
Inform and Remind
When you introduce new buying rules, expect an adjustment period. Purchasing habits built over months or years won’t be immediately broken, Sawchuk says.
“Employees may have their favorite suppliers, and it may take time to re-establish behaviors,” he explains. “Emphasize that the changes are for the good of the company — both from a cost standpoint and for better spend tracking.”
Announce the new policy through a company-wide email, a newsletter or another means that communicates it effectively. If you have a document that details your purchasing policy guidelines, update it to reflect the changes and recirculate it as well. Then, follow up with reminders or notifications, especially with people or departments who make large or frequent purchases, to drive your message home.
A rule doesn’t stand much of a chance without consequences for breaking it. It may be counterproductive to forbid staff from making needed purchases or to require a manager to always approve them, but you need to make clear that violations will be noted. Otherwise, the rule won’t be followed.
Sawchuk says that simply encouraging the reporting of infractions can be a potent deterrent.
“The procurement team can tell buyers they’ll be flagging instances where people are not using preferred vendors and sharing a report with senior management,” he says. “Most buyers or end-users will determine the risk isn’t worth it, and will stay within the policy.”
In larger companies, compliance to approved contract may be reported at the department level rather than all the way up to centralized procurement. Department heads can then drill down further to explore employees’ reasons for non-compliance and reiterate the importance of using preferred suppliers.
Savvy procurement departments have turned to “guided buying” tools to improve compliance with supplier contracts. These tools — which are included in procurement software platforms — direct employees toward preferred suppliers, items and payment vehicles.
“Guided buying makes it easy for employees to get what they need when they need it, while staying within the bounds of a policy,” Sawchuk says. “It essentially steers purchasers down the right path.”
The specific features of guided buying programs vary, but they often include technology that easily guides you to preferred items and services that meet your requirements as well as budgetary and policy constraints. They also direct you to the most appropriate payment channel and, if required, to a procurement professional to assist with more complex purchases. Talk with your IT resource if you think a guided-buying tool could make sense for your company.
Procurement is about more than acquiring the right materials for the right price — it’s about being a valued partner to the business. The clearer you make your procurement policies and the easier they are to follow, the more your company will view your department as a vital partner in helping them obtain products and services.