Contract management is often thought of as a task reserved primarily for corporate legal departments, but there are many situations where others across an organization have important roles to play in the process. Even when members of the legal team are responsible for tracking and monitoring agreements throughout their lifecycles, they typically rely on colleagues who have greater knowledge of specific contract elements for guidance.
For companies with significant supply chain operations, procurement teams can provide important vendor and supplier information to help contract managers plan ahead and ensure that each agreement is properly managed based on the needs of the business.
This article looks at the role procurement teams play in the contract management process.
Provide Insight into Supplier Relationships and Performance
Nobody in an organization knows more about the details of each supplier relationship than the individuals and teams who work with those vendors on a regular basis.
Procurement teams should have the most insight to answer questions like:
Is this supplier meeting expectations and the terms agreed upon in the vendor agreement?
Do the terms of the agreement need to be revisited or renegotiated based on a shift in priorities?
Has the supplier made changes to the way they work since the contract was signed? Does this need to be addressed before renewing the agreement?
A major part of having an effective contract management process in place is ensuring that people responsible for managing contracts have all of the critical information needed to make educated decisions about your corporate agreements. Whether your procurement team manages supplier contracts or not, they have valuable insight to share that should influence decisions made about each vendor agreement.
Identify Opportunities to Cut Contract Costs
Those involved in the procurement process develop purchasing strategies to obtain products and services that align with company’s overarching goals and objectives. Because of this, procurement teams must closely monitor their processes and continuously evaluate whether each vendor agreement helps move the company forward, provides value to customers, or represents something needed to operate effectively. They also must closely analyze supplier agreements to determine whether each product or service can potentially be acquired for less money from a different vendor.
The procurement team can then use these insights to help the contract management team understand where there’s potential to reduce contract costs by terminating or renegotiating agreements that:
Are going to be replaced by a more cost-effective vendor arrangement
Are no longer essential to the business
Can be scaled back based on changes in consumer demand
Contract managers and procurement teams should meet regularly to ensure that both sides have the most current information regarding upcoming contract dates and milestones, vendor updates, and more.
How Contract Management Software Helps
Contract management software can greatly improve the way procurement teams and contract management teams work together to optimize contract portfolios. Here are some of the ways dedicated software can simplify and streamline the contract management process.
One central source of truth
Contract management software allows businesses to store all of your agreements in one location so individuals and teams across the organization can all access the same versions of a contract. Storing agreements in a central repository also eliminates the need for employees to print or email contracts back and forth for review, which can expose your sensitive information to unnecessary risk of falling into the wrong hands.
Ability to immediately locate specific contract details
When your agreements are stored and tagged in a contract management system, you can use advanced search capabilities to instantly find specific contract details, clauses, or terms, including things like:
Upcoming renewal, opt-out, or renegotiation deadlines
Search functionality is one of the core reasons businesses adopt contract management software. For procurement teams, the ability to quickly answer any questions about supplier agreements eliminates the time and hassle of scouring through lengthy contracts to find one dollar amount or specific language about payment structure.
Improved contract and vendor reporting
Procurement teams need to have a strong understanding of exactly how every vendor is performing, and while that can be accomplished manually, using the reporting tools that come with many contract management software solutions streamlines the process. Whether you need to run a one-off report for an annual vendor audit or you want to see weekly updates on upcoming expiring agreements, custom contract reporting can save time by automating this potentially tedious task. Once your agreements are organized in your contract repository and key information is tagged, you can then set up and schedule reports based on any piece of contract metadata.