Each team member of the procurement department is going to have a specific role in the procurement process. Staffing the procurement team with informed individuals who are capable, knowledgeable, and take ownership of their roles within the department is important in building an effective, and efficient procurement team. Everyone involved in procurement should have a clear understanding of how their job-functions play into the overall procurement strategy. This extends from upper management to procurement team leaders and all the way down the corporate ladder. Contract management is a vital aspect of the procurement process. A contract manager, in regard to procurement, is one of the most important roles among the procurement team. Acting as the bridge between vendors, procurement software, and the company itself, contract managers are the waystation for communication.
Communication between contracted suppliers and the procurement team can often be high in volume and difficult to follow without a proper paper trail. With an effective contract manager, these communications are streamlined and should be organized in detail within the procurement software. This centralizes these communications and makes them accessible for any number of reasons. Centralizing these communications also makes it easier for contract managers to take charge of contract security.
Establishing stable and secure supply chains builds multiple layers of value into a company. This value stems from aspects such as customer-trust, and lifetime savings. Savings aren’t only a result of having consistent and steady contracts, but also from maintaining lifetime partnerships that grow in value.
The Role of The Contract Manager
The contract manager has many functions built into their job description. The procurement team relies on the contract manager to establish supplier-relationships that are long-lasting and mutually beneficial. Finding these contracts and maintaining them is only the start. In addition to this, contract managers need to be prepared to handle off-contract purchases, as well as staying updated on the length of existing contracts; preparing to hunt for new deals when the time presents itself.
Establishing Initial Contracts
This is arguably the main and most important function of a contract manager within a procurement team. Finding suppliers with which to establish an initial contract is an integral aspect of the role. This function is conducted with procurement software that allows contract managers to find credible, accredited, and certified suppliers that are trusted by consumers and the industry alike. This is vital, as conducting business with unreliable suppliers is a risk that businesses want to avoid.
Having a contract manager dedicated to establishing the initial contract with reliable and sustainable suppliers sets in motion the rest of the procurement team activities which lead to the acquisition of inventory.
Off-contract purchasing is another function that’s overseen by contract managers. It’s the process of supplementing the current supply-chain with additional purchases from vendors that aren’t currently under a long-term contract with the company making the purchase. These transactions are a fantastic way for companies to enable custom orders or bolster their inventory in the event of a demand-spike. Off-contract purchases also come in handy when there’s a sustained demand-spike, while it provides a sort of temporary relief on the supply-chain while the company seeks more long-term contracts through which they can source.
While off-contract purchasing can be costly, procurement professionals armed with powerful procurement software are able to cultivate data and make informed decisions on when and where to purchase off-contract; ultimately, saving the company money and time.
Replacing Fading Contracts
Not every contract is worth renewing. There are often going to be suppliers fading out after their initial contract. These companies might simply be replaced by a company offering higher volume at a smaller per unit cost or could fade out of the supply chain entirely. Either way; these actions are going to be overseen by the contract manager. Responsible for finding replacement suppliers when it’s time to move on from any supplier for one reason or another – procurement contract managers are going to take on the important task of finding new suppliers when it’s time.
There are many functions involved in the procurement department of any company, in any industry. Each team member of a procurement team is going to play a vital role in the procurement cycle. The contract manager, however, is one of the most important and useful team members involved in procurement and software relations and can help companies avoid major contract management issues.