Establishing a steady supply chain is critical to successful procurement endeavors. Unfortunately, companies often have difficulty getting to this point due to a variety of intrinsic and extrinsic factors. Of course, contracting plays a significant role within the context of a company's procurement efforts, so good contract management is vital to improving supply chain performance. Here are 5 contract management tips for helping make that happen:
1. Research and Screen Suppliers
One of the easiest ways to ensure a smooth supply chain is by looking long and hard before jumping into a contract with a vendor. There are very few instances in which just any available vendor will do, and when it comes to something as important as establishing a steady stream of supplies, doing due diligence is essential. Before making contact with anyone, it should be easy to check out online information and reviews. Once a decision is made to move forward, companies should not be afraid to ask a prospective supplier for some references and maybe even a tour of its facilities. A thorough screening process will likely prove critical in avoiding disruptions down the line.
2. Identify and Mitigate Risks
It is probably impossible to avoid any and all issues when relying on other companies to consistently and punctually deliver quality goods. Although an occasional hiccough is bound to happen, larger and more significant problems must be identified and controlled. For example, if a potential supplier is located in a country with unreliable transportation and your company has strict timing that must be followed, then it would be foolish to go that route, even if it is less expensive. Ultimately, a big part of the research phase must also involve a consideration of the risks the prospective supplier brings along with it, which may be related to the vendor's size, scope of products, geography, or political and economic climate. And, for risks that must be assumed, contingency plans must be put into place in the event something goes awry.
3. Centralize Supply Agreements
Once suppliers are located and strong contracts are put into place, the real contract management process will begin. The key to keeping things in check will be utilizing purpose-built contract management software. An online database can and should be set up as the primary contract repository. By centralizing all of the company's supply agreements, misplacing contracts or ending up with order redundancies are a lot less likely to occur, ensuring a smooth supply chain.
4. Be Aware of Critical Dates
The importance of timing cannot be overstated when it comes to the purchase and delivery of key supplies. For most companies, from manufacturing to the most high tech industries, adhering to strict timelines is critical to a company's budget and ultimate success. Even minor delays can have tremendous consequences, so being aware of critical dates and demanding timely performance are imperative. One of the easiest ways to manage a tight schedule is by relying on automated alerts. Contract management software allows for their easy creation so that email reminders are sent and important deadlines are not missed.
5. Include Key Stakeholders
Successfully managing the procurement side of any business is going to require the cooperation of personnel across departments. As with most business operations, keeping the supply chain intact cannot occur in a vacuum. For example, employees in finance and budgeting will need to know the economic impact, Human Resources may need to base hiring decisions on procurement requirements, and the leadership team must know if and when key benchmarks are going to be met. To ensure the best results, communication among the key stakeholders must occur at regular intervals. Otherwise, failing to keep people in the loop could result in ill-timed overages or shortages in staffing and production.