Facing the challenges in Contract Management
Contract management can be the link between strategy and execution and that makes contract management a tricky part as enterprises could build or lose significant savings through contract management. Contract management plays a vital role in focusing on key measures such as compliance, collaboration, and commitment; and the impact of globalization, re-sourcing, re-negotiation and innovation. As such, implementation of the ‘right’ strategy can help you address issues while leveraging contracts across the enterprise.
When companies (esp. in Retail and Manufacturing) invest on Contract Life cycle management packages / tools, they soon realize that the package is not flexible enough to manage the growing business needs such as Globalization, changes in business processes like invoicing against contracts etc. Apart from this, some of other challenges include
Lack of collaboration internally as well as externally,
Absence of clear metrics and measurements of contract values and compliance,
Penalties for non-compliance unknown,
Lack of tools to track and manage contracts
And finally poor implementation due to poor articulation of user requirements and organization TCM – Transition Change Management aspects not addressed.
In order to face these challenges, before investing on any contract management solutions, it is suggested to create a compelling business case by auditing internal contract management processes, systems, and controls. This will ensure there is no inflexibility in the system. Apart from this, Central Repository should store all the contracts and all authorized parties should have access to the past and the current contractual information.
All sub-agreements should roll up to the parent agreement like Item level to Commodity level to Supplier level and Department to Company to Regional org to the HQ. Also template based contract creation ensures that the appropriate clauses, terms and conditions are used and templates can streamline contracting cycle time, minimize risk, and maximize compliance.
Last but not the least, it is of utmost importance to measure program performance and results and look for the areas of improvement to keep the business evolving.
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