A procurement playbook is a strategic tool that provides businesses with comprehensive guidance to facilitate prompt and smooth contracting processes with suppliers.
In this article, our Commercial team explores the key benefits of a procurement playbook, how it can help streamline contractual procurement to save time and costs; and how it can protect your business and your customers from unnecessary risks.
Contents:
What is a procurement playbook?
Efficiently securing supplier support is often critical for business success. However, procurement processes frequently face delays, leading to significant time and cost consequences. To address this challenge, you can take a proactive approach to simplify and accelerate your supplier contract procurement processes.
One effective strategy is to create a procurement 'playbook' – a strategic tool that provides you and your team with comprehensive guidance to ease the contracting process and accelerate completion. A well-designed playbook serves as a roadmap, outlining procedures, best practices, and pre-approved contractual terms.
By implementing a procurement playbook, you can equip your business with predefined guidelines and a framework for navigating the procurement process. This proactive approach helps streamline negotiations, reduce delays, and complete contracts more efficiently.
Additionally, a playbook also helps protect your business from potential risks. By incorporating risk management strategies, compliance requirements, and legal considerations into the playbook, you can ensure a more secure and compliant procurement process.
What to include in a procurement playbook?
The purpose of a procurement playbook is to minimise contractual risks, standardise negotiation tactics and speed up supplier contract closures.
It can include guidance notes, preferred supplier template contract terms and considerations and rules for negotiating contracts.
It can also establish rules around who should negotiate and where escalation to your senior teams or legal advisors is necessary. A procurement playbook can also include ancillary resources like checklists, training materials and ‘clause banks’ for use in negotiations.
A procurement playbook will be unique to every business, as its contents will depend on your procurement requirements and risk appetite.
Benefits of a procurement playbook for supplier management
Establishing a procurement playbook requires the short-term investment of time and careful planning. In return, you benefit from enhanced risk management; opportunities for training your team on negotiation strategies; and time and cost savings over the longer term.
A procurement playbook will make you better placed to negotiate supplier agreements to protect your best interests. Otherwise, where you are in a rush to close a deal, you could agree to a contract that could expose your business to risk, including loss of money.
In addition, you may benefit from the following strategies:
- Conducting initial due diligence on potential suppliers to assess their suitability.
- Requiring suppliers to supply on your terms, where that approach is commercially justifiable.
- Identifying critical ‘dealbreaker’ terms, such as a requirement for supplier indemnities.
How can a procurement playbook accelerate contract closures?
A procurement playbook serves as a bespoke 'wish list' of your expectations from suppliers, guiding contract negotiations and setting expectations for what you wish to achieve from the outset.
This approach can facilitate quicker contract closures by:
- Adopting a standardised negotiation strategy across all suppliers.
- Establishing clear parameters for required key legal terms from the outset.
- Implementing a swift escalation process for accelerated decision-making to avoid delays.
Overall, the prior investment of time can save time and costs for all of the parties involved in the negotiations.
Key contractual clauses to consider
A procurement playbook can define the specific standards and expectations suppliers must meet when contracting with you.
By clearly communicating these requirements in advance of negotiations, you can reduce the risk of mismatched expectations and ensure that your suppliers understand their obligations early in the negotiations.
A procurement playbook will often include guidance and pre-approved language in relation to the following:
- Contract term. You may prefer a specific fixed term, rather than auto-renewal terms.
- Payment terms. These should reflect your internal invoice payment procedures.
- Protection for intangibles. You will want to safeguard your intellectual property rights, confidential information, and personal data.
- Compliance. You may have specific requirements in relation to anti-slavery, anti-bribery, and other laws.
- Exit rights and remedies in cases of supplier default. Liquidated damages, credits and refunds may all be appropriate remedies.
- Liability. Warranties and indemnities from the supplier to protect the business from risk and to apportion liability between the parties.
- Dispute resolution clauses. These can help manage any disputes more constructively than immediate recourse to the courts and can help a relationship to survive a dispute.
Practical considerations when developing a procurement playbook
Drafting a procurement playbook requires time and careful thought. In addition to key contractual clauses, it should take practical considerations into account. These include:
- Assessing existing (and past) contracts to gauge the business’ tolerance for risk and establish ‘bottom lines’ for contract negotiations.
- Providing comprehensive, jargon-free, guidance notes so your negotiator can understand the key issues and know when to seek legal advice.
- Establishing clear escalation procedures to address negotiation obstacles.
- Mitigating risks associated with supplier non-compliance, through regular reviews, audits, and contingency planning.
- Requiring the supplier to have in place specific levels of insurance to cover its potential contractual liabilities and to provide evidence from time to time.
- Monitoring the effectiveness of the playbook over time through thorough review and analysis. A procurement playbook should be a working document, that is included in your contract lifecycle management process and evolves to meet the changing needs of your business.
Conclusion
A procurement playbook can be an invaluable resource for streamlining your supplier procurement processes, offering your business a structured approach to negotiating contracts and mitigating risks effectively.
By establishing efficient negotiation strategies and implementing best practices in contract management, a procurement playbook can help you to fast-track the closure of your supplier contracts and to optimise your supplier relationships. It can also help to safeguard your customers from unnecessary risks in your supply chain.
Our Commercial team can help you to draft and tailor a procurement playbook that is unique to your requirements and accurately reflects your risk appetite.
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