STRATEGIC SOURCING OF SUPPLIEARS: CONTRACT MANAGEMENT AND HOW TO GET WHAT YOU HAVE AGREED:

?“If you fail to contract you are fail to manage.” - World Commerce & Contracting association.

Contract Management, the final step in the strategic sourcing process. This step, or rather this phase, is about how you ensure that everything you've agreed with the supplier as part of the new arrangement is accomplished and lasts throughout the life of the contract.

You see, the benefits you've secured and enshrined in your new contract, over which you may have had some hard-fought negotiations, will only be delivered if the supplier performs against what's been agreed.

These benefits could be:

• Reduce ambiguities and disputes
• Lead time reduction,
• Quality improvements,
• Enhanced management information
• Provision of training or continuous improvement workshops
• Higher-caliber account director

You may have documented these in the contract itself or in a service-level agreement, or SLA, appended to the main contract. It's proven that the supplier's performance against the contract is directly related to the way in which the contract is managed. If you just file the contract and forget about it, it's likely that supplier.

Performance will start well, but then slowly decline, perhaps improving again prior to expiry with the supplier hoping that will be enough for you to renew the contract.

As a minimum, you should manage the contract for compliance where you oversee that the supplier complies with the contractor commitments to the letter. In this way, supplier performance is likely to be consistent throughout the contract life, again, perhaps improving slightly prior to expiry.

An even better approach, especially relevant to suppliers you deem important to your business and with whom you've agreed explicit continuous improvement commitments or performance incentives within your contract, is to manage the contract for performance.

Now, during multi-year contracts:

• The situation is unlikely to stand still though.
• Things change like external (PESTL) and internal factors
• The objectives of your entire organization might evolve
• Which in turn will impact on your business requirements
• The supply market may also change.
• New regulation could be introduced,
• New technologies may emerge that could create fresh opportunities and challenges

So throughout the life of your contract, it's beneficial to carry out a periodic assessment of whether the contract itself and the business requirements that the contract addresses remain relevant. The last thing to say about contract management is to prepare for expiry.

Although it may seem a long way off, take the opportunity now of noting the contract expiry date in your contract management system, or by making a note in your calendar for a date, perhaps six months before the expiry date.

This will ensure that you have sufficient time to evaluate all the potential options prior to expiry, such as: Renewal

• Extension
• Letting the contract expire
• And carrying out another strategic sourcing activity

In this way, you'll be in control of the process so you don't have an undesirable option forced upon you. Contract management is a critical phase.

What can you do to improve your contract management approach within your business?