By necessity, Contract Management has moved on from the old days of paper copy and filing cabinets. But what does ‘good’ really look like?
We recently published a piece about what ‘good’ strategic sourcing looks like. After all, if you are one of the many procurement organisations in the vast middle of the market, good is more likely to be your goal than total dominance.
In any area of a business, the difference between okay and ‘good’ may be the presence of a few extra steps, a little more attention to detail, or a bit more creative energy. This as is true for strategic sourcing as it is for contract management.
Contract management has evolved substantially since procurement started applying technology to expand its impact. It used to be that ‘good’ contract management meant your filing cabinet was complete, paper files were maintained in some sort of recognisable order and the drawers didn’t squeak too loudly when you opened them!
Legacy contract management was completely hard copy and based on the premise that procurement would be handled by a team co-located not just with each other, but with the stakeholders they supported.
Today contract management has the potential to be one of the most critical and impactful activities conducted by procurement. This is partly due to the many changes the modern workforce has gone through. Companies and teams now span the globe, working in distributed offices or even from home. A filing cabinet full of dusty paper doesn’t stand a chance of being considered “good” today.
So what does ‘good’ contract management look like now?
‘Good’ contract management…
Has escaped the filing cabinet and gone completely online
Going beyond the filing cabinets of the past is essential given today’s new workforce trends. But the benefits of taking contracts online are far greater than just accessibility. Out of sight, out of mind as the old saying goes, and if there was one thing filing cabinets did almost without fail it was to ensure that contracts would be forgotten.
Now that contract management is conducted in the cloud, expiration and renewal dates can be set to alert the appropriate points of contact. The same is true for purchase volume thresholds associated with discounts or alternate terms. Contracts are regularly referenced and actively leveraged between signature and expiration, partly because they can speak for themselves, thanks to ‘good’ contract management technology.
Makes legal just as happy as procurement
While procurement and legal may not always see eye to eye or have the same priorities for contract management technology, it is absolutely essential that both teams fully adopt the chosen solution. The maximum value is achieved when red-lining, signature, storage and reporting all happen in one place, and for that to be a reality, legal has to support the solution.
This probably played the greatest role in contract management solutions growing beyond repositories. Quick access to standard language, a clause library and the ability to support eSignatures gives legal meaningful reasons to embrace contract management.
Is an active process that supports additional enterprise efforts
Procurement can achieve so many things through contracts, far more than just designating approved suppliers and specifying prices and service levels or delivery timelines. Companies can invest in, and benefit from, their small and diverse supplier programmes, ensuring that certifications and accreditations are both up to date and documented.
While strategic sourcing and contract management both have a process component and a technology component, the tie is much stronger with contracts. Given the needs of distributed accessibility and centralised data, contract management can not exist without effective technology, let alone aspire to be ‘good’. If all spend brought under management is covered by contracts, then all of procurement’s work should be conducted under, and informed by, contracts.
Supply chain risk can be monitored and mitigated, as can complex regulatory oversight and compliance. Better still, contracts can become a launching pad for innovation and collaboration projects with our most strategic supply partners. All of this is made possible when actively managed contracts create a safe, protected space for business to happen in.
If you would like to know about about Ivalua’s Contract Management Solution, please visit the Ivalua website.