Supplier contracts are often signed and then filed away in a desk drawer or shared drive without much management, except for when there is a problem. Until a new contract can be negotiated or put out to tender, the supplier delivers the goods or services and invoices are paid.
That’s fine. However, by failing to manage the contract properly, there are missed opportunities to save both time and money. Especially when it comes to correctly giving a notice period or ending the contract. Does any company really want to throw money away, especially at the moment.
If a contract has a notice period, then failing to observe it can prove costly, as the contract may automatically renew for another year. It is likely that there will be price increases written into the initial contract, and worse yet, it may be a waste of money if the supply is no longer needed, or the quantity required may be reduced. The last thing anyone wants is to spend another year with a supplier who is not delivering the best service. There are some types of contracts that are more difficult to get the notice period right than others.
Similarly, missing a contract end date can have similar consequences to missing a notice period, and the easiest way to resolve it is to extend the contract with the incumbent supplier so that punitive rates will not be charged. This is fine, as long as the incumbent supplier is doing a satisfactory job.
Trying to locate lost contract documents or requesting them from the supplier is time-consuming. It may be difficult to get a supplier to provide the documents if they are not incentivised to do so, wasting even more time.
It’s quicker and easier to renew with the incumbent than to go out to the market for other offers even if the contract end date isn’t missed, but supply is only reviewed just before the contract end date. This could mean losing out on a cost reduction or working with a new supplier who offers better value for money, is more innovative, or whose values are more aligned.
An increasing number of organisations are utilising a contract management system to avoid waste of time and money, as it provides them with an easily accessible repository with all of the associated documents. Furthermore, it sends out automatic alerts well in advance of crucial dates to ensure that notice periods and end dates are never missed again.
Many companies, especially the larger ones with more resources, find it easier to implement processes and to monitor supplier contracts. For SMEs with fewer resources, there is a Contract Management solution that can help them keep track of their supplier contracts easily. oboloo is an intuitive self-service solution that integrates Contract, Sourcing, Supplier, and Savings Management for companies to be supplier smart. For more information, please visit www.oboloo.com.
You can use the following external articles to get a better understanding of points to consider when creating or improving your supplier contract management process: