Contracts executed on behalf of the company with the suppliers of goods or services lay down pre-determined rules and obligations between the parties to the contract. A procurement contract is just about this. Like other contracts which lay down the terms of agreement, procurement contracts too, stipulate the criteria, quantity, quality, terms and obligations of the parties. Bridging the gap between the vendors and the organization, pre-necessitates having a robust contract management is procurement for quintessential function.
Procuring the right vendor and streamlining the supply chain contract management system is a crucial aspect for any business, requiring collaboration of teams, external professionals and legal counsels on toe. Of course, from the organizational standpoint, there are a host of challenges that managers face, when it comes to procuring it right and sourcing things or services from the right vendor. To add, legacy contracts for procurement of vendors is long known to have its shortcomings due to human agency, errors and ergo. The pain points include finding the right vendors, price points, quantity and quality issues, while also ensuring that there are no delivery delays, inadequate inventory and managing supplier relations at the same time.
To add, end-to-end procurement processes involves cross-functional teams working alongside with each other to get the perfect draft, active collaboration between teams, communication, over the perfect draft is a challenge.
In the process of end-to-end vendor management, there may arise several issues pertaining to transparency, relationship with the vendors, co-ordination and collaboration between the organization and the supplier. One has to also factor in the financial integrity compromises that may be made, negotiation of contracts, and the overall resources used in the process, including the contributions of the general counsel, CFO in overall contract lifecycle management. Compliance-related risks need to be mitigated at the initiation stage.
By integrating the supply chain practices with procurement contract, organizations stand to benefit by having proper checks and balances and remedial measures. In what follows, we shall examine the relevance, impact and application of procurement contracts with relation to having a robust supply chain management in the organization.
Procurement contracts are either cost-reimbursable, fixed price contracts or based on time/materials. In general terms, a contract is legally enforceable entered into between the parties to the contract on mutually agreeable terms. The act of “Procurement is acquiring of goods, services or works” from a known vendor/supplier to meet the end purpose, while also take care of the quality, quantity that meet the stipulated criteria. The value proposition for having a robust procurement contract is highlighted below:
The primary step towards streamlining procurement processes is to standardize processes, ensure transparency in the overall systems and ensure contract compliance. By embedding AI into the Legal contract lifecycle management software, PracticeLeague aims to bring multi-fold benefits to an organization, wherein the end-users make sure that the contract milestones are met, and the agreement is honoured on time. Overall, this is how it works for a company.
If a firm wants to become a supplier of a pharma company, it will be required to submit several documents to the concerned person including the type of supplier. On the basis of this, the company will now select the vendor, ask for more documents, get documents signed such as non-disclosure agreement, drafting the contracts, or a supplier registration agreement. This is how it works for a legacy system. In case of a procurement contract management system, the vendors are asked to upload the documents through the link, giving details of the supplier info. The tool asks several relevant questions such as “category of the supplier, payment terms, etc). Thereafter, a contract is generated by the sanctioned template, through an automated process based on the keyword search, the use of clause library. The draft is then sent to the legal department/supply chain management personnel for review and approval.
As against the other established systems that provide Contract Management system for completion of procurement cycle, PracticeLeague CLM provides for an interface through which the contract reviewer is able to feed additional information back to the system to understand and get the detailing better. Besides ensuring timeliness, contracts are efficiently managed in terms of quality control, pricing while also having checks and balances for evaluating risk and mitigating at the right time. The AI-technology makes it happen. “AI gets better with more and more data fed into it” says, PracticeLeague.