What new strategies are companies using to manage contract risk in supplier sourcing?

1 Dynamic contracting

One of the new strategies that companies are using to manage contract risk in supplier sourcing is dynamic contracting, which means adapting the contract to the changing needs and circumstances of the parties. Dynamic contracting allows for more flexibility, collaboration, and innovation in the sourcing relationship, as well as reducing the risk of disputes, delays, and penalties. Dynamic contracting can be achieved through various mechanisms, such as agile methodologies, clauses that enable renegotiation, modification, or termination, and digital platforms that facilitate real-time communication and feedback.

2 Data-driven decision making

Another new strategy that companies are using to manage contract risk in supplier sourcing is data-driven decision making, which means using data and analytics to inform and optimize the sourcing process. Data-driven decision making can help companies identify and evaluate the best suppliers, monitor and measure their performance, and identify and mitigate potential risks. Data-driven decision making can be supported by tools such as artificial intelligence, machine learning, and blockchain, which can automate and enhance the analysis, verification, and execution of contracts.

4 Risk-sharing models

A fourth new strategy that companies are using to manage contract risk in supplier sourcing is risk-sharing models, which means distributing and balancing the risk and reward of the sourcing process among the parties. Risk-sharing models can help companies create win-win situations, incentivize performance and innovation, and reduce the exposure and liability of each party. Risk-sharing models can be implemented through various arrangements, such as outcome-based contracts, gain-sharing agreements, and joint ventures.

5 Continuous improvement

A fifth new strategy that companies are using to manage contract risk in supplier sourcing is continuous improvement, which means constantly evaluating and enhancing the sourcing process and the contract. Continuous improvement can help companies identify and address gaps, issues, and opportunities in the sourcing relationship, as well as adapt to the changing market and customer demands. Continuous improvement can be achieved through practices such as benchmarking, auditing, feedback loops, and learning and development programs.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?