You need to manage your supplier contracts. How can you do it effectively? (2024)

Key takeaways from this article

• Review regularly:

  Keep your contracts up to date by regularly reviewing them. This ensures they align with current standards and practices, keeping surprises at bay and fostering a proactive approach to supplier management.

• Seek continuous feedback:

  Open up the floor for feedback from your team and suppliers alike. Integrating this input into future contracts can lead to more effective agreements and stronger, mutually beneficial relationships.

This summary is powered by AI and these experts

• Jagadeesh Ulaganathan Country Head India | Sourcing Leader |…
• Matt Hofstetter Senior Sourcing Manager - Packaging at…

• Jeffri Muliawan 17 Years Procurement Professional - Certified ISO 9001:2000 Internal Audit - Certified Lean Six Sigma - FIDIC Certified

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  Effectively manage supplier contracts by implementing Contract Lifecycle Management (CLM) software, ensuring centralized storage, automated workflows, and alerts for key dates. Regularly audit and update contracts. Foster clear communication with suppliers, addressing concerns promptly. Establish key performance indicators (KPIs) for supplier contract performance. Conduct periodic reviews to identify cost-saving opportunities. Invest in supplier relationship management (SRM) tools for holistic contract and relationship management.

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• Samuel Kioko Inventory Controller |Warehousing Management|Distribution Logistics|Order fulfillment|Purchasing and Supply Chain Management|Fleet management

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  To ensure effective supplier management strategy, organizations must develop strategies to source and select suppliers, negotiate contracts, maintain relationships with suppliers, manage risk efficiently, and evaluate performance regularly.

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  Utilize contract management software such as Concord, Icertis, or ContractWorks. Implement a centralized repository for contracts, automate alerts for renewal dates, and establish standardized contract templates. Regularly review and update contracts to ensure compliance and mitigate risks, ensuring effective supplier contract management.

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• Jagadeesh Ulaganathan Country Head India | Sourcing Leader | Global Procurement | Public Speaker | Toastmaster | CXO Incubator

  (edited)

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  Every contract agreement has a Validity and the clauses that talk about Pricing, Lead time and quality.The suppliers need to be monitored regularly against their KPI, and if any improvements are needed must be discussed with the supplier and then the same has to go as an annexure.

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• Saravanan Panneerselvam Seasonal Procurement Leader | Project Management I Supply Chain Management | Operations I Top People Management Voice

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  I would say, The contract is basically to maintain mutual agreement of customer and supplier cost, quality and delivery agreements. And these days we are implementing AI in our system this will help both customer and supplier to have trigger point in terms of closing date, renewal date and also this will highly help to update the system on the terms and conditions.

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  See Also

  Supplier agreement template - free to useSupplier Agreements - Supplier Contracts and Agreements | AnsaradaSupply and Purchase Agreement: Examples and BenefitsProduct Supply Agreement Template | Contractbook

• Antonio Goncalves CEO @ procuro.ai • helping unlock more value from your contracts • AI-powered Procurement

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  It is concerning that current contract management systems are not equipped to effectively handle supply chain contracts. This poses a significant challenge for businesses, as supply chain contracts are vital for ensuring smooth operations. It is crucial for companies to invest in advanced contract management systems to address this issue and optimize their supply chain processes.

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• Jagadeesh Ulaganathan Country Head India | Sourcing Leader | Global Procurement | Public Speaker | Toastmaster | CXO Incubator

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  There are a lot of tools available to have better contract lifecycle management in place.A tool should send reminders about contract expiration, and it must have better connectivity with the tools that monitor On-time delivery, Supplier PPM level and any other commercials that define the businesses.We are in an AI world and the tool must simply do the data collection work for the sourcing team.

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• Kyaw Swa Aung --

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  Implementing a contract management system can significantly improve efficiency and transparency in contract-related tasks, ultimately saving time, money, and effort.

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• Jagadeesh Ulaganathan Country Head India | Sourcing Leader | Global Procurement | Public Speaker | Toastmaster | CXO Incubator

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  I used to work on SAP Ariba which also acts as a contract management tool.We used to load all the Supplier Framework agreements. The workflow usually has a contract owner and the managers in the form of approvers.The reason for having multiple approvers is to arrest the clause that doesn't have an advantage to the customers.The workflow for suppliers will also have a similar setup.

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• Matt Hofstetter Senior Sourcing Manager - Packaging at Albertsons | Experienced Sales and Sourcing Professional

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  Having been on both sides of the desk, I can definitively say that contracts are critical. People retire, people leave, people change roles, companies change ownership, etc., meaning that relationships can expire. Also, relationships shouldn’t make you willing to take on a bad agreement or knowingly leave a gap (i.e. “we can just leave that out and if it ever comes up, we can just work through it then”.) Contracts are designed to define and address the “what-ifs”.That said, relationships are just as critical as contracts, and they can impact the contracting process itself. With a strong, professional relationship, the ideal scenario that occurs is never having to even pull the contract out…at least not until it’s time to renew.

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  The contract should also consider all risks that may affect the business in future by by risk I mean risk on your company as well as the suppliers risk as well.This could be delivery delay, quality defects, termination clause, payment delays etc...Penalties should also be applied to avoid this from happening.

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• Ahmed kassem Packaging , Business Development, Sustainability Passionate

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  One of the essential requirements that your vendor has to implement IMCR program for incident management and crisis resolution. The program should also includes post events review to drive improvement and prevent further future incident

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• Amit Rathore Manager- Direct and Indirect Procurement, PG Certification Program in International Business and Finance (IIFT)

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  Managing of supplier contract directly linked to the relation and mutual understanding with that supplier, very important to have strong relationship with your supplier which sometime helps to resolve agreement conflict using win win situation for both.

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• Jagadeesh Ulaganathan Country Head India | Sourcing Leader | Global Procurement | Public Speaker | Toastmaster | CXO Incubator

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  Achieving a finalized contract may require considerable time, especially considering potential disagreements on certain clauses among suppliers. It is imperative that the discussions remain transparent throughout this process, ensuring that both parties gain a comprehensive understanding of their respective responsibilities.

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• Jagadeesh Ulaganathan Country Head India | Sourcing Leader | Global Procurement | Public Speaker | Toastmaster | CXO Incubator

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  Evaluation is a continuous process.One who keeps looking for improvement, comes out the best.Be open to getting feedback from Peers and even the suppliers whom they have negotiated the contract with and then incorporate the lessons learnt in the upcoming contracts.

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• Antonio Goncalves CEO @ procuro.ai • helping unlock more value from your contracts • AI-powered Procurement

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  This is an area where sourcing tools need more automation and intelligence. Tools today only track expiration dates and some other surface level metrics. AI will be powerful here to help teams take full advantage of the contracts they spend months negotiating.

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• Kyaw Swa Aung --

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  Continuous improvement is essential for an effective contract management process. Regular evaluation, identification of strengths and weaknesses, and implementation of targeted improvements, along with monitoring and measuring their impact, are key to ensuring ongoing effectiveness.

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  Contract management process is a complete lifecycle and every step of the process determines how successfully it'll be implemented for both suppliers and customers. One of the aspects which is usually ignored is dispute resolution. Conflicts during the lifecycle can arise due to various factors like:* Non clarity of the KPIs or milestones * Non compliance by either of the parties. * Payment terms not honoured* Change in the scope during the project * Dispute over quality of the deliverable* Dispute over lead time of the deliverable* External factors/force majeure* Liquidated damages* Contract termination clauses Having said that, there must be very well written duties and obligations and arbitration/resolution framework.

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