Contract Management Benchmarking: Performance

 

 

   
 

CMB: Benchmarking Model

Our initial research and market review of benchmarking tools led to the development of a bespoke Contract Management Benchmarking model. The Contract Management Benchmarking model considers the inputs and outputs (or performance) of managing contracts. The model has been developed based on research and observation of best practices across different sectors.

The CMB tool considers what organisations do (inputs) to create an environment where good performance (outputs) can be achieved. The model is organised into three Categories with three Elements (nine in total) for each Category. The Categories are Manage, Performance and Relationships.

Our database includes data and information from over 300 discrete submissions. 60% are listed business and represent 15 different sectors from manufacturing to distribution, aerospace, defence and marine to retail, banking and financial service to the public sector. 20% are FTSE 100 businesses.

  • 75% of participants have a Contract Management process in place,

  • 28% have organised Contract Management as a separate function,

  • Contract Management is represented at Board level in 42% of participating businesses.

 

 
 

CMB: Benchmarking Model

Category

Elements

Performance

How the conditions are created to enable high levels and improving performance through continuous improvement activity, innovation (doing things differently rather than just better) as well as the commercial model (or bottom line) in terms of how price issues are managed, the total cost of working together is accurately reflected in business decision making and how mutual opportunities to add value are recognised, measured and considered in terms of the wider aspects of working together, incentives and reward.

Continuous Improvement

The focus and level of activity and role that continuous improvement activities and techniques are considered and applied in relation to the contract and joint activities (or processes) between client and supplier including forecasting and planning, operational performance and performance improvement and cost reduction.  

Innovation

The level of activity and focus on doing things differently or innovating (versus continuous improvement which is doing the same things better) in relation to processes, how people are organised and work together or technology applied to deliver improved performance.

Price, Cost and Value

How commercial performance is managed in overall terms to consider the role of price and margin as part of a better and more informed total cost perspective e.g. a higher price may be worth paying if the total cost is lower, the focus on margins and the level of openness and transparency on prices and cost as well as the potential and opportunities to consider the wider issues of value add or how one party can or may create value add opportunities by providing access to new or different markets or can leverage improvements or technology to create more market share or revenue for example. 

 

   
 

CMB: Performance

Performance is now multi-faceted and traditional measures of quality, delivery and price are limited in terms of considering the wider aspects of maintaining and improving performance. Performance must be considered in commercial terms but total cost and environmental factors and sustainability drive different thinking and decision making. From a commercial perspective price, cost and value provide a bigger picture than price alone. Continuous improvement has more potential than a static approach where the status quo is considered acceptable. Innovation, or doing things differently, rather than the same things better might provide a step change or provide a more sustainable solution.

 

   Performance Facts & Figures

  • 52% of participants have defined performance improvement targets,

  • 22% have dedicated performance improvement teams,

  • 22% have targets for innovation as part of contract delivery,

  • 31% have defined price reduction targets included in contracts,

  • 43% share price reductions with suppliers,

  • 34% measure their own cost of managing contracts.

 

 

   

 

The CMB Survey and contents are SCMG.
No further use of this material is permitted unless agreed in writing with SCMG.

CONTACT DETAILS
Tel: +44 (0)141 945 6461. email: cmb@scmg.co.uk