Use Case | Application of the Generative Model for Framework Agreement Optimization

Application of the Generative Model for Framework Agreement Optimization

General Description:

Framework agreements are key instruments for establishing long-term relationships with suppliers, ensuring favorable conditions and flexibility in acquisitions. This generative model allows the analysis and optimization of framework agreements to ensure they are competitive, aligned with the company’s strategic needs, and minimize risks.

How It Works:

1. Uploading Framework Agreements:
   • Users upload the framework agreements to the system in PDF format, along with supplementary data such as related purchase orders.
2. Automatic Model Analysis:
   • The model analyzes the framework agreements by reviewing key aspects such as:
     • Price Competitiveness: Is the offered price competitive compared to the current market?
     • Delivery Terms: Are clear and adaptable delivery timelines included to meet operational needs?
     • Flexibility: Does the agreement allow adjustments in volumes or terms as needs change?
     • Guarantees and Penalties: Are quality guarantees or penalties for non-compliance mentioned?
     • Review Terms: Are mechanisms established for renegotiating terms periodically?
3. Evaluation and Classification:
   • The model classifies the framework agreements into:
     • Optimal Agreements: Aligned with current needs and favorable terms.
     • Agreements Needing Optimization: Present critical areas that require adjustments to improve effectiveness.
4. Report Generation:
   • The model generates a report with:
     • Agreements Ready for Continuation: Agreements that are well-defined and ready to continue without modification.
     • Agreements Needing Adjustment: Agreements with identified issues and recommendations for improvement.

Usage Example

Scenario: A company wishes to review and optimize 10 existing framework agreements with strategic suppliers to ensure their competitiveness and relevance in the current context.

Simplified Process:

1. Uploading:
   • The 10 framework agreements are uploaded to the system for evaluation.
2. Automatic Evaluation:
   • The model reviews key aspects in each agreement:
     • Are the prices competitive compared to the market?
     • Do the agreements include clear terms for deliveries and penalties?
     • Do they offer flexibility for changes in purchase volumes?
     • Do they include review or renegotiation clauses?
3. Results:
   • Optimal Agreements: 6 agreements meet the established criteria.
   • Agreements Needing Optimization: 4 agreements present issues:
     • Agreement 3: Prices are above the market average.
     • Agreement 5: Lacks flexibility for volume adjustments.
     • Agreement 7: No clear penalties for non-compliance with quality.
     • Agreement 9: No clauses for periodic reviews.
4. Generated Report:
   • Optimal Agreements: Ready to continue without modifications.
   • Agreements Needing Optimization:
     • Agreement 3: Review prices and renegotiate to align with the market.
     • Agreement 5: Add terms allowing volume adjustments based on operational needs.
     • Agreement 7: Include clear penalties for quality non-compliance.
     • Agreement 9: Add a periodic review clause to maintain competitiveness.

Benefits for End Users and Managers

1. Identification of Improvement Opportunities:
   • Detects critical areas in framework agreements that could be affecting the company’s competitiveness.
2. Strategic Optimization:
   • Allows for the adjustment of framework agreements to align them with current and future organizational needs.
3. Easy Management:
   • Provides a clear and actionable report that facilitates renegotiation of terms with suppliers.
4. Cost Savings:
   • Identifies agreements with unfavorable prices or terms, helping to renegotiate for reduced operational costs.
5. Compliance and Control:
   • Verifies that framework agreements include necessary quality guarantees, review terms, and penalties to protect the company’s interests.

Summary of the Generated Report

• Agreements Analyzed: 10
• Optimal Agreements: 6
  • Competitive prices, flexibility, and adequate guarantees.
• Agreements Needing Optimization: 4
  • Agreement 3: Prices above the market average, renegotiate.
  • Agreement 5: Add terms for volume adjustments.
  • Agreement 7: Add penalties for non-compliance.
  • Agreement 9: Add periodic review clauses.

Recommendations:

• Negotiate with suppliers to adjust prices and conditions in identified agreements.
• Introduce terms offering greater flexibility and protection against risks.
• Establish periodic reviews to maintain the relevance and competitiveness of the agreements.

Conclusion

The generative model for Framework Agreement Optimization ensures that the terms of agreements with suppliers are aligned with the company’s strategic needs and market conditions. By automating the evaluation, it provides clear reports and actionable recommendations to adjust and improve agreements, strengthening relationships with suppliers and optimizing long-term costs and benefits.