Five reasons why it may be worth simplifying your supplier network

Corporate secretarial departments and legal officers often oversee enormous organizational complexity. Part of this complexity stems from the volume and scale of a firm’s international network of suppliers and business partners. While there are many benefits of having local suppliers, there are also challenges to bear in mind. Here we lay out five reasons why it may be worth thinking about simplifying your supplier network.

1. It will save time negotiating contracts

If you require suppliers for similar services across various countries, you will most likely have a standard contract, a pre-defined scope of services and expectations for delivery. However, as soon as you start negotiations, significant differences will arise between different suppliers leading to a complex tapestry of agreements. In contrast, with global firms or a single provider, it can be much simpler to standardize contracts across jurisdictions and service lines.

2. It will give you more agility in responding to regulatory changes

Multinationals usually agree on a term contract which can then be extended automatically. But, contracting with a single supplier has another surprising benefit, namely agility.

One of the major challenges of managing complex supplier networks is ensuring that the relationship is able to keep pace with regulatory changes, particularly where those changes are global and far-reaching. GDPR and the possible effect of Brexit on international agreements provide good illustrations of this kind of scenario. A local service provider may be aware of regulatory or legal changes in their country of operation, but may not be as attuned to international developments. Contracting with a single provider with a global reach gives you and your business a broader perspective and enables you to respond to regulatory changes fast and thoughtfully

3. It will become easier to maintain supplier relationships

Across your entire supplier network, there are probably hundreds of contracts. Given finite resources it can be nearly impossible to maintain and keep track of all these relationships. Different service providers will most likely have differences in how contracts are executed and delivered, and you may find it easier to reduce the complexity you manage by working with a smaller number of larger, international suppliers.

4. It will simplify your compliance with international legal frameworks

International legal frameworks like the EU’s GDPR create obligations on third parties all around the world where they interact with a European business or entity. With legal frameworks becoming more and more stringent from tax to data protection and anti-money laundering, dealing in an international environment becomes both, more expensive and more complex. This complexity and cost increases exponentially with the number of local service providers you contract with.

5. It will streamline your workflows

Some company secretaries and legal teams may remember when there were only physical board meetings and all documents were signed, stamped and kept in original. This time has gone and there have been significant changes in how contracts are signed (electronic signatures), how documents are maintained (cloud) and where those documents are renewed (suppliers own online system).

However, this does not necessarily mean that your relationship with your service providers has become simpler. Some suppliers or jurisdictions may require you to sign in the original or deliver contracts by post. Sometimes outdated techniques stem from local requirements, but in so many cases, it is just how people are used to doing business. Working with larger, multinational suppliers can help to streamline some of these workflows and to get rid of unnecessary inefficiencies.

Milda Valevice, In-house Legal Counsel, Vilnius
Citco GSGS Focus – Summer 2019