When it comes to procurement and supply chain management, one of the most important decisions that companies have to make is selecting the appropriate type of agreement to govern their relationships with their suppliers. Two common types of agreements that are often used are outline agreements and scheduling agreements. While they may sound similar, they have distinct differences that procurement professionals should be aware of in order to make informed decisions.
Outline Agreements
Outline agreements are long-term agreements between a company and its supplier that provide a framework for future transactions. They typically cover a range of goods or services that the supplier will provide over a certain period of time. Outline agreements are useful for companies because they can help to reduce the cost of procurement by locking in prices and terms for future purchases.
There are two types of outline agreements: quantity-based and value-based. Quantity-based outline agreements stipulate a specific volume of goods or services to be delivered over a certain period of time, while value-based outline agreements are based on a specific amount of money that will be spent on goods or services from the supplier.
Scheduling Agreements
Scheduling agreements, on the other hand, are contracts between a company and its supplier that specify the exact quantities and delivery dates of goods or services to be provided. They are typically used for short-term procurement needs, and they provide a more detailed level of specificity than outline agreements.
Scheduling agreements specify the exact delivery dates and quantities of goods or services to be delivered, which gives the supplier a clear understanding of the company`s needs. This helps to ensure that the company receives the products it needs on time and in the quantities specified.
Key Differences
The main difference between outline agreements and scheduling agreements lies in the level of detail they provide. Outline agreements provide a general framework for future transactions, while scheduling agreements specify exact quantities and delivery dates.
Another key difference is that outline agreements are generally long-term contracts that cover a range of goods or services, while scheduling agreements are used for short-term procurement needs.
Which One to Choose?
The choice between an outline agreement and a scheduling agreement depends on the specific procurement needs of the company. Outline agreements are useful for long-term procurement needs, while scheduling agreements are better suited for short-term procurement needs that require a higher level of detail.
It is important for procurement professionals to carefully consider their procurement needs and evaluate the benefits of each type of agreement before making a decision. Ultimately, the right agreement will help to ensure that the company receives the products it needs on time and at the right price.