Picture this: a group of procurement officers and buyers gathered around a conference table, high fiving each other over their latest victory. They\u2019ve negotiated an exceptional contract, secured the best pricing available, and added all sorts of value, from training and extra coverage to 24/7 support. Meanwhile, just a few miles\u2014or even a few feet\u2014away, the end users of these products and services are groaning over yet another contract with a vendor, one that will undoubtedly complicate their jobs and make their daily tasks more labor-intensive.
So, why this disconnect? The procurement team may argue that it\u2019s because the end users weren't involved in the process, or that they\u2019re \"spoiled\" and demand the highest quality, often to the detriment of the organization\u2019s financial health. On the flip side, end users might feel that procurement doesn\u2019t care about the actual utility of the products or the quality of the vendor relationship; they\u2019re just focused on saving pennies and making themselves look good.
To address these disconnects, many organizations have turned to Value Analysis Teams (VAT). The key to success with VATs lies in selecting the right participants: decision-makers, subject matter experts (SMEs), and those who are free from political agendas. The goal is to create a space where different perspectives can be openly discussed and valued. To ensure long-term success, these teams should meet regularly, establish clear goals, and define core values that guide their work.
A major responsibility of the VAT is to review whether a product or service is truly needed, guide the development of the Request for Quotation (RFQ), and evaluate vendor proposals. One of the most critical elements in this process is the development of Key Performance Indicators (KPIs). While I wouldn\u2019t necessarily advocate for SMEs to take part in contract negotiations, I\u2019ve seen many SME professionals with exceptional negotiation skills who\u2019ve been able to secure outstanding contracts. It\u2019s important for VATs to review and approve both the contract and the KPIs before the senior procurement officer finalizes the deal. Any changes to the contract during negotiations should be brought back to VAT for review, ensuring alignment with the KPIs.
Even after securing a favorable contract, why do end users still feel dissatisfied? The answer lies in the KPIs\u2014these metrics should not only be used during the contract development phase but must be monitored throughout the life of the agreement. Unfortunately, many organizations overlook the importance of continuously reviewing KPIs, relying solely on basic metrics such as back orders, product defects, recalls, and invoice discrepancies. These traditional supply chain metrics alone won\u2019t ensure end-user satisfaction or deliver the full value from the contract.
The VAT and strategic sourcing team must actively educate end users on the importance of KPIs and the benefits embedded within the contract. Regular feedback from end users is vital to assess how the vendor, product, or service is performing. The strategic sourcing team needs to keep the lines of communication open and collect feedback regularly to ensure that the contract\u2019s value is being realized. Even the Centers for Medicare & Medicaid Services (CMS), the agency overseeing healthcare regulations, supports this approach, emphasizing the need for ongoing contract evaluations.
Contract evaluation doesn\u2019t have to be complicated. It should start with a set of basic questions that focus on the most crucial aspects of the contract. The key evaluators should be those who are actively using the product or service. They need to review and understand the KPIs and ensure that feedback is shared with the appropriate parties. The strategic sourcing team can then review the feedback and decide whether to share the results with the vendor. It\u2019s highly recommended that the sourcing team communicates upfront with the vendor, informing them that their products and services will be evaluated regularly.
Successfully navigating a major sourcing event is a monumental achievement. However, true success isn\u2019t just about striking a good deal\u2014it\u2019s about maintaining and optimizing that value over the course of the contract\u2019s life. The contract execution should be treated as a milestone, and the \"finish line\" shouldn\u2019t end once the agreement is signed. It\u2019s vital to extend this evaluation throughout the entire contract duration to drive sustained value, ensure ongoing improvements, and, most importantly, guarantee that the end users are getting the best possible experience.
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