It comes without saying that contract management has a critical role in each and every major project or enterprise-wide Procurement program. Surprisingly, but contracts may be often considered as only having place to give permission to project initiation or just serving to provide an immovable reference point in case things go terribly wrong. Nowadays, however, monitoring commercial agreements, in line with having their digital repository well-maintained and always up-to-date to properly meet the ever-changing Procurement needs, supply-side demands and fluctuating circumstances around the project can become a powerful mechanism — not only for keeping major projects on track, but to maximize their value, proactively address risks and effectively optimize general contract returns after all.
That being said, below we are going to quickly run through several crucial tips to better contract management. Although some of them may seem self-explanatory, the following basic considerations and simple suggestions should be never ignored by procurement leaders and their teams, particularly in case the company is serious about putting an end to using outdated and, therefore, highly manual contract lifecycle management software.
By definition, contract lifecycle management is a proactive, methodical process of handling a commercial agreement through the stages of initiation, award, compliance, and renewal. Therefore, when it comes to contract management software implementation, there would be 7 core objectives for the modern business:
Given that sourcing and purchasing teams are facing an ever-growing amount of challenges to better performance and cost reduction, this has been giving a spur to the recent developments in complex end-to-end solutions and custom software applications designed to handle the contract lifecycle management as it’s meant to. Apart from countless man-hours saved and, therefore, a greater value created for the company, it’s hugely important to understand that, without being augmented with the presence of effective and automated contract management system, there is no other way for in-house experts to properly address increasing compliance and countless analytical needs of the modern business. Of course, this is not a matter of immediate concern. Yet still recognizing that contract management would be indisputably a very time-consuming area of the enterprise-wide critical operation, a great need for effective and fully automated contract management workflow becomes crystal clear.
Make sure to have only clear and well-defined provisions for both sides of the purchasing deal. Otherwise, poor structure or improper wording can drive lots of potential conflicts hard to resolve — opening your company to confusion, abuse, or even legal action. Pay strong attention to Key Performance Indicators you’re using to evaluate supplier performance and understand how committed your partners are to delivering against benchmark targets. And from the viewpoint of effective contract management, more thought should be necessarily given over there before we go any further. As some KPIs are providing a nice opportunity to take on various forms of reasonable contractual obligations leaving the door open to dialogue, better relations, and seamless cooperation with the key suppliers.
While being willing to adjust and adapt into contract management is important, most of everything in a commercial agreement must be swell-defined. Of course, there is still a room for flexibility, as the circumstances and business needs always change. But building long-term relationships consistently remains the key for any successful company, meaning both contract itself and a sense of commitment should be both in place around each and every supplier you are dealing with. At the same time, however, putting a strong emphasis on contract duration will also work in the best interests for all parties. With a combination of the major market factors taken into account and considering how easy it would be to switch suppliers, you should always keep in mind how long the company needs the contract to last too.
It’s important to have the appropriate contract management provisions, with strict clues and agreed guidelines embedded for the whole duration of the agreement. Considering that, for the most part, there can be no true “emergency” to bring non-addressable disruptions into Supply Chain, it’s quite literally a job for contract lifecycle management to give bad things nothing to chance or, at least, drive the fallout to the minimum. Meaning that it will only take time to have all the issues managed completely under strict and agreed guidelines, which should be outlined in the form of single provisions within the contract duration. Doing so, make sure to keep the level of managerial complexity relevant to the scope of the project or, at least, in correlation with the deliverables or services you’re sourcing and the element of their criticality in your business sustainability.
If it comes to extremes, businesses might as well want to host some kind of special arrangements to fix the underperformance issues, meet constantly evolving industry demands and sometimes equally disturbing procurement variables. The same forward-looking spirit of contract management would be true when the company is pressed to reconsider certain legal statements or must quickly adapt to some recent changes or updates. Unfortunately, the real world often has too many things that — let’s face it — tend to spin completely out of control.
Keeping everything about potential contract violations always on track would be, therefore, a hardly manageable thing, particularly in case of scaled business. There is basically no difficulty in building the whole procurement team backed with specialized staff for legal services, of course in case the company has no problem spending enormous resources. But it’s still possible to achieve the proactivity required for serious contract management strategy producing success without being prohibitive by price — you can easily find a reliable end-to-end solution or simply get the latest contract lifecycle management software, a standalone module which can be readily deployed in your organization within weeks, not even months.
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