National Programs, a collection of 45 brands, provides a multitude of services to each of our companies. We’ve written in the past about how these Shared Services help launch programs faster, broaden our market reach, streamline product launches, and help companies boost their bottom line. Today we’re going to shine the spotlight on our Vendor Management team, who works with our companies and programs to bring about greater savings on vendor contracts.
The team focuses primarily on vendors specific to underwriting reports and third-party data. Recently we sat down with the team (Commercial Division COO Lisa Stahl, VP of Commercial Operations Tamara Loper and Operations and Compliance Analysts Amanda Herbison and Matthew Demers) to learn more about what they do and a few successes they’ve seen recently.
First, what’s involved in vendor management?
Loper: Vendor management includes activities such as
- Selecting vendors
- Negotiating contracts
- Controlling costs
- Ensuring service delivery
- Researching products
- Setting up demos between vendors and our various companies and programs
- Identifying cost savings opportunities using volume-based pricing
- Overall relationship management
Demers: We also research and analyze invoices to ensure the correct pricing is reflected. We review new and existing contracts for accuracy and completeness, as well as identify any concerning terms that need to be addressed.
Herbison: And we ensure vendor access is properly set up – for example, that services and reports are accessible. For some of our companies, we handle administrative tasks on vendor websites, such as maintaining users and providing access to specific products. We monitor usage on contracts that are usage-based to ensure we don’t go over our allotted volume. Lastly, we serve as a repository of sorts to track who’s using what vendors, what they are paying and much more.
How long has your team been in existence?
Loper: It started in 2017 when I discovered one of our companies had seven or eight contracts with the same vendor across their various programs. And they were all paying different prices for the same product. I was able to negotiate with that vendor to bring pricing down for all applicable programs to match the lowest price charged. As more contracts came across my desk, I’d look for similar contracts for the same product, and contact those vendors for cost savings or expanded services.
In 2021, we took a more proactive approach looking for savings opportunities and reached out to various National Programs companies to offer our services. Both Amanda and Matt joined us last year to further expand our capabilities. Prior to 2017, each program handled their own underwriting data and third-party data contracts.
What success stories can you share for your team?
Loper: Here are three examples that come to mind:
- Some of our programs use a third-party billing service because they don’t have an internal billing system due to the complexity of their billing needs. After reviewing invoices and contracts for two of our programs using the same vendor, we discovered one was paying almost double the rate of the other. The contract with the higher rate had been in effect for 11 years! So I called the vendor to ask that they reduce the rate on the higher-priced contract to match that of the lower-priced contract. We saved that program approximately $211,000 annually.
- One of our companies had multiple contracts at the program level with another vendor we use for underwriting reports, all at different price points. With one phone call, we got them to agree to charge all applicable programs at the lowest rate. In addition, we let them know we wanted to create an MSA (master service agreement) for all our entities. This would both expedite the access to products and allow us to take advantage of their volume-based pricing. The pricing changes alone resulted in savings of approximately $69,000 per year. One program is now saving approximately $1,600 per month. The monetary savings don’t include the time savings created by having this agreement in place. Any program is automatically covered under this MSA, eliminating the need for each program to procure their own MSA.
- When we discovered that three of our programs had contracts with the same vendor for the same product, we suggested that they enter a committed volume contract (vs. a transactional pricing model) together to take advantage of volume pricing. This resulted in an overall savings for the three programs of $472,953 over three years.
In addition to direct price savings, the team has scored many other successes such as:
- We’ve been able to identify things in contracts such as an unclear definition of “transaction.” One program leader said he needed 5,000 transactions per month – but when we reviewed the contract, we discovered that each transaction includes up to five properties. Therefore, he was able to significantly reduce the number of transactions he was committing to purchase.
- We’ve identified that charges for duplicate orders were not addressed in contracts, so we added language in the contracts to clarify that duplicates would not be charged, to remove any ambiguity should an issue arise at a later date.
- Prior to signing, we’ve identified incorrect charges added to a contract by a vendor that used incorrect math to pro-rate the pricing for a mid-term product addition.
- Our team has worked with various programs to identify services that were being paid for but no longer needed, resulting in the cancelation of one or more obsolete products, leading to additional savings.
- We’ve discovered programs that were paying two separate vendors for duplicate services, resulting in the termination and consolidation of contracts that were no longer needed.
Stahl: Here are my two favorites:
- Overage charges on a committed-volume contract were being assessed, but we were not aware because we never received any usage reports or invoices from the vendor. It was determined later that invoices were being sent to an incorrect address. In addition, the contract stated that the vendor would provide monthly usage reports. Due to the vendor’s errors, the team was able to get most of these overages waived.
- In another instance, the team found that there were multiple invoices over a five-year span that were never generated for products that were being used. Due to the length of time that had passed, the team requested that the invoices be waived. This resulted in significant cost-savings.
How are you looking forward to impacting cost savings and contracts in 2023?
Loper: We’re looking forward to saving our programs as much money as possible! We recently completed two contract negotiations that each took three years to finalize. We look for the biggest spends and do our research to see what cost savings we can negotiate.
Our savings aren’t just in contract pricing. We also save our legal team’s time because we can research and modify contracts before they review them. Speed to market is another savings we provide. Our entities need these contracts quickly, but there’s a lot of work to be done before we get to the finish line: An MSA must be created and approved by both parties, and a statement of work must be completed prior to having access to the products. Our team has set up the process so that it’s much quicker and easier to get the products our programs need. The time savings is often significant. To date we’ve worked with approximately 40 entities, and this year we’re looking forward this year to working with more!