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The relationship between an organization and its vendor, in a supply chain process, is regularized through the process of contract management. The term contract management refers, to a set of contracts that are administered by partners, companies, and employees, for the smooth functioning of business work flow. The standardization of contracts is primarily to gain a consistent flow of supplies, in order to elevate the productivity of the organization as well as ensuring customer satisfaction.

Contract management influences a few areas within an organization, such as operations, customer service, finance, and public image. It is also important to ensure that the contract is in compliance to the negotiations that are laid down, between both the associated parties, so as to avoid facing difficulties, during its execution.

White Paper: The Ideal Buyers Guide To Contract Management​

The most important factors that govern any contract management are the Service Level Agreements (SLA) and Key Performance Indicators (KPI). The SLA identifies the magnitude of service that is expected from a service provider to the concerned organization. It also helps the organization to analyze the benefits that would arise from a particular contract. On the other hand, the KPI evaluates the efficiency of an organization in achieving its business objectives.

Why contract management is important?

Contracts are essential for the sound and efficient working of any organization. In certain situations, a contract management can possibly run into complexities, due to, lack of proper communication between the vendor and the client. The responsibility of successfully implementing a contract is a mutual effort placed by both the parties. Contracts are designed keeping in mind the specific requirement of an organization. Without the active participation of the company’s management, the ability to achieve the goals of the contract laid is hugely compromised.

It is often observed that the vendor is expected to administer and monitor the contract, and on certain occasions also provide automated solutions to its client. The company should express its needs to the vendor clearly and precisely, instead of accommodating its process requirements, as per the given contract solution. A successful implementation of the contract only takes place when the there is absolute assistance and commitment to the vendor from all employees within the organization or a particular division of the organization.         

A well planned contract management process  

Contract management is a well-thought and systematic process that adheres to certain guidelines that are laid down for its timely fulfillment. In order to maximize vendor performance and minimizing operational risk, both the partners should maintain the spirit of giving and take to meet the requirements of a given contract. 

The contracting firm must ensure that it is prepared to meet the commitment placed with the organization. The vendor should be equipped with the latest technology and skilled personnel for various operations during the stipulated duration of contract completion. Contracts are designed to meet organizational specificity and distinctiveness, incurred often at huge expenses. Therefore, it is essential that the implementation of contract management is dealt through proper and disciplined approach so as to refrain from financial losses and business instability.

Read:  White Paper on Contract Risk Management


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