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Contract Management & Delivering Value

April 6, 2011

Is your contracting process a source of value, or is it undermining value?

That is a question we should all be asking, especially following the results of a recent IACCM study on ‘The State of Sales Contract Management’. It revealed the extent to which contracting process and practices act as a barrier to good business decisions, with 40% of survey participants saying that their contracts are a definite source of competitive DISadvantage! And if you are in Procurement, don’t stop reading – this data is relevant to you as well. Because if your suppliers are not achieving value, nor are you.

The study has confirmed frequent weaknesses in internal collaboration, leading to imprecise requirements and poor communication. Those are the types of weaknesses that can permeate a business, leading to problems in performance on customer commitments and inaccurate information flowing to operations teams within the supplier.  The study highlighted the impact of these issues – for example, how they lead to claims and disputes over price, acceptance, scope and a range of other contract-related topics.

These failings cost money and damage corporate reputations. The situation has been getting harder to manage, as the complexity of today’s business relationships and supply networks increases. To quote from the report: “The internet age and growing deal complexity have resulted in increasing confusion over what constitutes ‘the contract’”. Yet a few companies are mastering this complexity by ensuring that they have a process and systems tightly coupled with their sales activity. And one key finding is that “Automation has a consistently beneficial effect on the quality and integrity of the process, yielding substantial increases in the satisfaction of all internal business groups”.

Most organizations have not yet grasped the scale of lost revenue or lost savings opportunities tied up in their contracting process. The size of this opportunity and the approaches needed to drive improvement will be revealed in the white paper ‘The State of Sales Contract Management’ and also in presentations at AribaLIVE and in webinars later this month. Meantime, how would you answer these questions:

  •  Do you see contracts as a source of competitive disadvantage for your organization, or for your trading partners?
  • Is your legal team or contracts group effectively managing risk, or is their inflexibility or risk aversion actually proving to be a source of risk?
  • Have you automated your contracting process – and if so, have you benchmarked its performance?
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