2024 will bring much change to the Vendor and Contract Lifecycle Management (VCLM) world.
That includes Third Party Risk Management (TPRM), an essential part of VCLM.
I’ve been keeping tabs on what’s happening, speaking with people in the weeds, and strategising for a big 2024.
My Top 5 VCLM Trends for 2024
Here are my top 5 Vendor and Contract Lifecycle Management trends for 2024 that you should be aware of.
As part of this, I reviewed two articles I wrote last year.
In our Procurement Trends 2023 article, I discussed:
- The Rise of Digital Procurement
- Vendor Management turning its focus to sustainability
- Transactional to strategic procurement
- Becoming partners with our customers
- Prioritisation of vendor management
I’d say, on reflection, that all of these will gain more prominence in 2024. You’ll see more of an evolution of these trends in this article.
I also wrote my 5 TPRM trends for 2023 which included:
- Understanding data protection roles
- Increased focus on ESG
- Greater use of tech and automation in vendor risk management
- Increased emphasis on resilience and continuity planning
- Vendor cyber health being top of mind
As with the procurement trends, and there is some obvious cross-over here, I see all 5 of these areas getting more attention as we turn to a phase of evolution.
VCLM Themes for 2024
Enough reflection; let’s get into my VCLM themes for 2024.
1. Agile and Collaborative Procurement
The first trend we see is a move towards more agile procurement practices. That’s not just for sourcing but across the vendor lifecycle.
Take the RFP.
Organisations are shifting from traditional Request for Proposals (RFPs) to dynamic, collaborative engagements with vendors. The shift from the RFP has been happening in tech companies for the last two years.
Let’s face it: no one gets excited creating an RFP, nor does anyone get excited when they receive an RFP to complete.
If we, as Procurement Pros, can get three relatively equal vendors and workshop a solid solution with them, this feels like a better approach than a long-winded, devoid of collaboration, RFP exercise.
Lauren Tennant, Founder and CEO of Horizon Seven Training, talks in-depth about this in our Procurement Reimagined episode.
I’ve also spoken to other experts from Monzo and Datadog who operate in the tech space where such sourcing work is the norm.
It was the norm in tech, and I even did this in aerospace.
It also saves money.
But enough of the sourcing piece.
We can deploy agile methods throughout the pre-signature vendor and contract management phases. The reason we don’t is that so many people are still operating in a manual way where everything has to be sequential."
But we can move beyond this with digital solutions, such as a VCLM platform and rely on workflows to orchestrate an agile process. This is a short, fast-paced, multi-disciplinary team effort where Vendor Onboarding, Due Diligence, NDAs, and full Contract Reviews happen more or less simultaneously.
If you combine this with the agile sourcing process, you don’t lose leverage on the contract element, which you’d review simultaneously with all three (or however many) vendors you are working with.
2. Emphasis on Risk Management in Vendor Relationships
Effective risk management is becoming increasingly crucial in VCLM as organisations get a reality check that manual vendor risk management doesn’t cut it.
"Vendor management means different things to different people. But the way we think about it, it's really bringing together everything to manage the relationship with your third-party vendors all the way from the very beginning [...] through offboarding the relationship at the end of the day." - Tom Rogers, Procurement Reimagined Podcast.
I like what Tom said to me in 2023. We focused on vendor management and how risk is at the core of best-in-class vendor management. The challenge is getting to that point.
There are silos everywhere in organisations, and in between those silos are where risks like to emerge and fester until they’ve rotted away your protections.
Tom went on to say:
"The biggest gap right now is companies trying to figure out, all right, we want to take this more strategic approach, but we're set up operationally with all these silos over here."
Tom has covered it perfectly here.
Teams from across finance, procurement, and legal will be focused on their strategic vendor risk management and strategies, but not at the expense of getting into the weeds.
Whether or not you’ve figured everything out, risk management must happen today.
We’ll see more focus on vendor risk management and the maturity of this throughout 2024.
3. Integration of ESG Factors
Environmental, Social, and Governance (ESG) factors are gaining prominence in procurement and vendor management.
However, I’ll throw caution into the headwind around this in that the politicised nature of ESG could bring this to a halt.
I’m not sure what language to use, but perhaps we’re trying to say that we want to work with vendors who respect the planet, its people, animals, and environments.
Organisations are aligning their procurement practices with broader sustainability and social responsibility goals. This includes considering ESG factors in vendor selection, contract terms, and ongoing monitoring.
This has been gaining traction throughout 2022 and 2023.
It feels as though 2024 could be a big year for this. The rise of companies such as Temu, a Chinese company that sells low-priced consumer goods and uses forced labour, shows that these problems aren’t going away, especially if your Tier N vendors are based in China.
4. Challenges of Traditional Contract Language
Contracts are painful in 2024. Procurement and vendor-focused contracts are sometimes some of the worst and most complicated contracted documents I’ve read for no real reason.
noted during our conversation that “Contracts have just become very difficult to understand. People are copying and pasting stuff that they don't understand.”
Many of you will likely have “borrowed” a clause or two, or perhaps an entire contract you’ve encountered. But when this happens, we often forget to ask why we are doing this. What real risks is this protecting?
During our conversation, Paula Doyle noted the prevalence of protecting imagined risks in contract documents instead of real risks.
Too often, contracts are made far more complex than they need to be, which only adds costs. A simple contract review might cost around $6,900, a medium complexity contract could cost $14,000, and a complex contract might cost upwards of $49,000." - The Cost of Contract Complexity by Paula Doyle.
You could save a lot of money by making your contracts less complex.
5. Contract Design
There's a growing trend towards simplifying contracts and making them easier to read and understand.
We’ve talked about contract language in point 4. This is different, but the two should go hand-in-hand if you want incredible results.
Consider the layout of a traditional contract. It’s a wall of text, often complex and not understood by those who draft them, let alone those who need to use the contract in their daily work. What if contracts could be created differently? With dedicated sections for the stakeholders who will use it, those in legal and those in finance, for example.
Stefania shared an example with us on the Procurement Reimagined podcast of a contract that was a graphic. No writing, but made up from images because this was how to encourage a more diverse supply chain to come forward and bid for work.
2024 might be the year when organisations begin their journey of moving away from traditional contracts.
Closing Thoughts
You probably noticed that I didn’t specifically call out tech or generative AI here. They’ll be part of the picture, for sure. I’m of the view that most teams don’t have their data in a good enough state to make use of Generative AI.
And too many organisations still rely on spreadsheets and manual work methods. I see 2024 as a year of getting on top of everything and looking for ways to save money, improve working methods, and become more collaborative.
Yes, tech should feature there. But let’s focus on doing the work that will take us there.
If you're looking to get ahead in Vendor and Contract Lifecycle Management, we have plenty of resources to help you.
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