Strategic Contracts

Cost Containment and Reduction through Strategic Contracts

To help contain costs and reduce expenses, Procurement Services has awarded contracts that are open for use by all authorized faculty and staff.  These contracts are sourced through a rigorous process that includes spend analysis, input from staff through focus groups, the competitive bid process and negotiations  to bring a best-value product or service contract to the university community.

Finding What You Need

Procurement Services recognizes that university departments have unique product and service needs. To meet these needs, Procurement Services has awarded contracts with local, national, and international suppliers. Each supplier has a contract page with information about their commodity or service, how to use the contracts, and contacts for suppliers and designated U-M contract administrators. Contract administrators are assigned to strategic contracts to monitor supplier performance standards and compliance requirements. Contract administrators also assist university faculty and staff with finding products and suppliers, and contract questions and issues.

Visit Find Products and Services for your buying needs or shop in M-marketsite to visit a supplier’s catalog directly.

Strategic Contracts Versus Retail Shopping

The university’s strategic sourcing strategy involves establishing relationships with suppliers who provide deep discounts on products and services.  The leverage of the university increases as the spend on strategic contracts increases, creating the opportunity to increase and expand discounts, enhance service, and demonstrate to competitors the value of the contracts for the next cycle of strategic sourcing.  Benefits of strategic sourcing include improved negotiation power for the university to reduce costs, improved contract and supplier performance management, and lower overall procurement process cost through the reduction in the number of transactions that require the competitive bid process.

While the price of an item offered by a retailer may be less in dollar amount, the purchase of the item usually does not offer the lowest overall cost or best value for the university.  “Hidden” expenses also factor in to the university’s cost of buying items from retail stores.

Ordering through our strategic suppliers is the most efficient use of university resources and the best overall value for the university. Consider the following factors when buying on behalf of the university:

Factor

Cost and Other Considerations

Salary

After factoring in the employee’s hourly wage and benefits, and the costs of driving to the store, shopping, and driving back to work, it may turn out that the lower-priced item isn’t really lower-priced at all. Employee wages and effort expenses cannot be discounted, even if employees shop on their own time. The effort has to be accounted for because the university cannot require faculty and staff to shop after hours on their own time.

Cost of staff salary and time required to expense the transaction.

Productivity

Ask yourself: What core functions could have been completed during the time required to shop or process paperwork?

Cost of lost productivity time while the staff member is away from the office.

Delivery

Many university strategic suppliers offer free or reduced shipping

Price matching

Example: if a staff member finds the exact same item for less money at a retail store, OfficeMax will match that price and deliver the product free of charge.

To request price matching from OfficeMax, email Robyn Kruse at robyn.kruse@officedepot.com with the following details that apply:

  • ShortCode to be used for payment
  • Recipient name
  • Delivery address (including room/suite number)
  • The OfficeMax Item ID used for the price comparison
  • Competitor's item ID and manufacturer item ID (if known)
  • Prices from both vendors
  • Website link of the competitor's product
  • Product description
  • Brand name
  • Unit of measure (e.g. 12 EA in 1 pack, case, etc.)

Environment

Driving to/from a retail store increases fuel use, carbon emissions, and traffic congestion.

Consolidated procurement spend

By consolidating “spend,” and directing it toward one or a few suppliers, the university is able to get bigger discounts or price reductions that benefit the university as a whole.

Electronic procure-to- pay processing

Strategic supplier contracts achieve cost savings beyond lower prices by enabling strategic suppliers to electronically exchange product information, purchase orders, invoices, and other necessary information needed to procure goods and services.

Supplier performance management

U-M contract administrators are assigned to strategic contracts to monitor supplier performance standards and compliance requirements.

Contract administrators also assist university faculty and staff by finding products and suppliers, and addressing contract questions and issues.