In departments like procurement, there can often be so many concurrent activities that it’s hard to keep track of every single one. While a formidable effort needs to be dedicated to the actual acquisition side of things, just as crucial is the supplier management once onboarded. The contract lifecycle management starts the moment a contract is awarded to a supplier, and ends with either contract renewal, or contract expiration.
Procurement professionals are often hyper-concentrated on sourcing products and services from the best available vendors at the lowest possible rates. While this is an extremely important function of procurement, it’s really only one side of the coin, and only contributes so much to efficiency, and overall procurement savings.
Savings and efficiency are also improved by an effective contract lifecycle management, or CLM, strategy. A strategy that should include CLM software, a clear CLM process, and trained professionals on which the procurement team can rely.
Sophisticated CLM software is capable of delivering powerful results, and driving important business metrics. With functions like virtual signing, complete automation, and business intelligence, the CLM software by ProcurePort is top of the line, designed to elevate any procurement team.
The Steps of Contract Lifecycle Management
There are seven essential steps in contract lifecycle management.
- Template Authoring
- Contract Creation
- Contract Review
- Contract Approval
- Contract Execution
- Contract Performance
- Contract Expiration
These seven steps are overseen by the contract manager, who is responsible for fulfilling and overseeing the entire contract lifecycle process.
Templates are the backbone to automating processes. Integrating templates with business logic, and business intelligence creates an efficient process for employees.
Simplifying the process down the line, templates can improve contract-turnaround, and accelerate the onboarding process of new vendors.
Contracts can then be created from the templates stored in the library based on use-case, scenario, and other predictable variables. The more procurement cases that a team undergoes, the more templates will be available in the library.
This is an integral aspect to the swift and efficient creation of supplier contracts that the procurement team can deliver in almost no time at all. Once contracts have been created they can move into the next phase.
After the contract is created, it’ll need to be reviewed. This helps a company make sure that they are offering the supplier the discussed terms. The contract review step also acts as a redundancy check to ensure that all the t’s are crossed the i’s are dotted.
Contracts should be thoroughly reviewed before being sent to a supplier for approval, as the procurement team needs to have a thorough and comprehensive understanding of the terms included in the contracts being delivered to suppliers.
Contracts need to be approved and signed by both parties before they can be official. Oftentimes, contracts for one-off procurement projects will come in the form of a purchase order, which is a commitment of purchase in a certain volume.
However, for longer-standing supplier relationships, contracts can extend years, or even decades, and should be reviewed thoroughly by all parties involved to ensure an understanding and agreement of the terms included. This prevents supply-chain issues down the line, and helps protect companies from unfair deals.
Contract execution is the actual fulfillment of the contract. The supplier should meet all of the included terms and conditions. The procurement team should be also prepared to compensate that vendor appropriately and in accordance with the agreed-upon payment schedule.
After a contract is fulfilled, or goes unfulfilled, it is up to the procurement team to review and analyze the results of the contract. This should be a standard practice in every department as is, to review and improve upon completed projects. With an executed contract behind them, a procurement team can start to look at the details of the performance and derive important insight relating to performance.
In the case that a vendor went above and beyond the expected terms in the contract, perhaps a long-standing relationship is born. On the other hand, a failed contract could lead to a spoiled relationship. Either way, the performance review is integral to building a reliable supply chain.
There are really two ways for a contract to end. Either in expiration, or in renewal.
As stated above, in the case of a vendor performing the terms in the contract, and meeting all the expectations, a renewal could be in their future. However, if things didn’t go well – or perhaps, a different vendor went above and beyond, while one simply met the bare minimum standards – procurement teams need to take note and make informed decisions on suppliers to work with in the future.
ProcurePort offers some of the best procurement software available. From CLM software to RFP, and RFQ software, ProcurePort offers the best of the best. Visit ProcurePort today, and start exploring the procurement software solutions that will best fit your companies needs.