Contracts and pricing
Item-level analysis: lower costs and better supplier relationships
Christopher Solberg3 min read
Translated from Swedish. First published in Swedish on 20 September 2023. Read in Swedish
Price and contract terms are of great importance for how a company or organisation conducts its business. In some sectors they can be the difference between keeping costs down and going over budget. A regular item-level analysis of the terms gives full insight, increases efficiency and improves relationships with suppliers. Below we go through what this means and what it gives.
What item-level analysis gives
Lower costs. When we carefully compare different contracts and prices, we can see which alternatives are most cost-effective. This makes it possible to extend or renew those contracts instead of entering new ones, which may become more expensive.
Better contracts. A detailed review of the contract terms shows shortcomings and problems for which we can propose improvements. It can result in contracts with more reasonable delivery times, better service and warranties and more favourable prices.
More transparency. Item-level analysis makes contracts and prices more transparent. It becomes easier for the public and politicians to understand and check them.
Higher efficiency. The analysis can show where the organisation can work more efficiently. It can for example mean gathering contracts and prices in a common database or automating the follow-up of contracts.
Better supplier relationships. When we review contracts and prices we also see any problems in the relationship with suppliers, and can work to improve it.
The risks without regular analysis
Whether you work in the public or private sector, there are risks in not carrying out a regular item-level analysis. It can lead to overpayment, unfavourable contracts, poor insight, inefficiency and worse relationships with suppliers. Item-level analysis is the tool that prevents these problems.
How often should the analysis be done?
It depends on how often contracts and prices change and how important it is for the organisation to have current information on them. The analysis can be carried out regularly, for example every year or every quarter, or more often when circumstances require it. Whatever the interval, a clear strategy is needed.
How we work at Refero
During the analysis we look for trends, departures from patterns and possible problem areas. We attach great importance to the information being used to discuss and solve the problems. “Is it the seller who made a mistake, is it the system that is acting up, or what is the reason? Has the packaging gone from g to kg, bottle to pack?” are examples of questions we ask together with the client, to learn and to improve the client’s processes.
We also categorise purchases using SNI codes (the Swedish standard industrial classification). This lets us gather purchases with one supplier or spread them across several, which increases efficiency further and makes business relationships easier.
With a regular item-level analysis you get the greatest possible value and efficiency from every contract.
Is it time for an item-level analysis? Start a conversation.