Contract Management – An Essential To Procurement Management

By Author: Rahul Awtaney
Total Articles: 9
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Procurement Management is a process involving purchase of right product from the right suppliers. The process involves identifying the good/services to be purchased, sourcing efficiently, & managing suppliers. Procurement management also involves developing a healthy supplier relationship.

Awarding contracts is in a way culmination of the sourcing process. Hence a successful sourcing process can never be completed without the process of creating and managing contracts. This article will be focusing on the importance of having a contract management solution in place for efficient procurement management.

Contract Management involves the process of creating, monitoring and maintaining a repository of contracts. Contract creation & monitoring are presenting important challenges to procurement professionals all over the globe attributed mainly due to globalization and increased business volatility.

A central repository of contracts is crucial for cross functional teams to have easy access to contracts to check on various aspects like, ...
... utilization, compliance, analysis & reporting. This also helps procurement professionals to match spend to contracts so as to monitor & reduce on maverick spending.

With organizations dealing with numerous suppliers spread across geographies, it is important that procurement professional are aware of law of the land and terms & condition of doing business with suppliers in different geographical regions before entering into contracts. This has been the major challenge for creation of contracts.

Contracts are increasingly being viewed as a strategic tool in the hands of organizations. This requires for contracting to move beyond its transactional approach and deliver on building a sustainable relationship with suppliers. Organizations can hedge on such an approach to counter the volatile business environment.

Contracts are one of the key means to measure the performance of suppliers. Monitoring of contracts on regular basis helps procurement professionals to review supplier performance against contracts.
Thus it is seen that contract management plays a crucial role in the procurement process. Some of the best practices in contract management which will in turn lead to efficient procurement management are as follows,

•Creating dynamic contract repositories: Track and measure the compliance and if possible quantify the savings accrued from these contracts.
•Define, communicate and effectively manage to specified contract metrics: Establish benchmark parameters with regards to peers and industry. Track and measure
contract compliance and utilization based on these parameters and benchmarks.

•Institute regular contract audits and use them to create opportunities: Create complete audit trail records of contract negotiations with suppliers and improve visibility in areas of currency change & conversion.

•Standardize and accelerate contract authoring by maintaining a contract template and clause library: Ensure continuous updates to all clauses and ensure access to relevant stakeholders to modify templates.

•Create a standard workflow for collaborative authoring and negotiation of contracts: Create a standard work flow with set protocols and procedures. Ensure access to all necessary stakeholders during the contract authoring and amendment process.

About Zycus:

At Zycus we are 100% dedicated to positioning procurement at the heart of business performance. For more than a decade we have been the world's most trusted leader in Spend Analysis. With our spirit of innovation and a passion to help procurement create even greater business advantages, we have evolved our portfolio to a full suite of Procurement Performance Solutions - Spend Analysis, eSourcing, Contract Management, Supplier Management, and Financial Savings Management.