Supply Chain Management Review

Robert A. Rudzki

Compliance – Again!
September 5, 2008

In my work with clients, a recurring topic is compliance. And, it is often a subject that is looked at too narrowly. Here is an “oldie but goodie” from a blog I originally posted in January. 

One of the persistent challenges facing procurement and supply management is that of compliance. Unfortunately, the effort to improve compliance is often focused on after-the-fact enforcement. It can be much more productive to understand the fundamental reasons that drive people to use – or ignore – new contracts. Often, these reasons are related to the approach used by the supply management organization. 

First, a definition. Compliance typically refers to the percentage of a new supply contract that is being utilized by internal users. So, 100 percent compliance means that everyone that could be using a new contract is doing so (i.e. there is no “maverick spend”). 

My perspective is that compliance is not just an enforcement metric – it also reflects the effectiveness of the process used to select and negotiate with suppliers. 

Compliance has the best chance of being maximized when:

• A true, robust strategic sourcing process is utilized
• Stakeholders are identified and asked for input
• Stakeholders are involved throughout the sourcing process
• Local needs are explicitly considered
• A TCO (Total Cost of Ownership) perspective is used
• All options are on the table (no preconceived notions)
• Internal clients can “see” the benefits of proceeding with the recommended sourcing strategy, and ultimately using the contract
• Your sourcing efforts are part of a well-designed and comprehensive transformation roadmap (for background on the transformation roadmap, see my postings in the month of October 2007) 

When all of the above are present, compliance generally is very high – right from the beginning of a new contract.

Posted by Robert A. Rudzki on September 5, 2008 | Comments (0)