What is a Contract Management Plan and Why is it Important?
Planning, negotiating, developing, and signing a contract is a complex and time-consuming plan that requires significant research, preparation, and strategizing. A contract management plan helps companies approach this plan with clarity, efficiency, and actionable strategies. It includes determining the roles and responsibilities, expectations, requirements, and strategies of both parties involved, and enables clear communication between those involved. In the eCommerce industry, suppliers play a highly crucial role across the supply chain, and experts encourage the use of efficient systems to develop and maintain strong and positive relationships between companies and vendors. A contract management plans enables that by encouraging the use of strategic planning, stipulated guidelines, and strong communication. Additionally, having a plan in place helps improve negotiations, implementation, monitoring, and compliance for both parties, increasing the chances of maintaining a sustainable and collaborative partnership. In the expansive eCommerce sector, a contract management plan can help mitigate risks, improve financial terms, and enable significant growth.
What is the Purpose in Developing a Contract Management Plan?
Assess Risk and Value: Developing a contract management plan requires in-depth research into the process, the appropriate path forward, and most importantly, the potential risks and challenges that may impact or deter the contract terms and requirements. With efficiently procured data, companies can predict, identify, evaluate, and strategize for potential risks, significantly reducing the impact of any challenges or obstacles that may arise. Additionally, the plan helps companies critically assess and determine the value of the contract, and how it can or will help their business and growth. Assessing these two factors prepares businesses for the potential future of the contract, and helps establish clear expectations, strategies, and inputs.
Organized Planning: Having a predetermined plan can help address a variety of issues, reduce various challenges, minimize the impact of unexpected problems, set well-informed expectations, and conduct an efficient contract negotiation and signing process. It also helps determine roles and responsibilities, accountability, and deliverables, making the contract development and compliance processes significantly easier for both parties. With efficient strategizing, companies can also mitigate the chances of future disputes, ensure that all parties efficiently carry-out their operational responsibilities, reduce the probability of any unnecessary or unexpected delays, losses, and enable collaborative, well-planned growth.
Avoid Future Disputes: A clear contract management plan provides both parties with detailed insights into their responsibilities, their partners’ expectations, and the transactional aspect of the relationship. Having a previously stipulated approach and comprehensive division of the financial terms of the agreement, can reduce the possibilities of conflict, losses, delays, or other transactional issues. Maintaining a positive relationship is crucial to the mutual growth of the parties involved, and the successful implementation of a contract management plan helps maintain that by mitigating misunderstanding, miscommunication, or inefficient execution of terms that were agreed upon.
Clear Objectives and Expectations: A contract is a collaborative and combined effort, and companies are encouraged to maintain that approach to all potential and current partnerships. When signing a contract with a supplier, knowing both parties’ business goals and objectives helps develop a more trusting, honest, and transparent partnership, enabling higher efficiency, better communication, and a sustainable relationship. A contract management plan helps the company identify and present relevant business goals, targets, and expectations to the supplier or vendor, and ensure that both parties’ interests align to create a more tangible and achievable plan for the future. As companies grow, partners should grow simultaneously and support each other’s goals making their supply chain and businesses stronger, better equipped, and ready for all industry developments.
Pre-determined Timeline: Partnerships are commonly established for long-term targets, and partners must be provided with clear timelines to support the contract. When entering a contract with a supplier, companies must stipulate their expected and preferred timelines, and discuss the viability and requirements to meet those targets. Through mutual discussion and collaborative strategies, both parties can agree on a pre-determined timeline making operations more efficient, the partnership stronger and more reliable, and overall performance higher. With strict timelines, companies can deliver to customers efficiently, and increase customer satisfaction substantially.
The eCommerce sector has grown exponentially due to the rapid advancement of technology, surge in digitization, high usage of smartphones, and increased need for convenience. This sudden growth has led to many companies struggling to identify, negotiate, and sign contracts that support their operations and help them meet their consumers’ needs and demands, while being cost-effective and efficient. Unable to understand the cause for their delays, low compliance rates, and high conflict rates with suppliers and vendors, a leading eCommerce industry player chose to partner with SpendEdge and identify the challenges in their contract management processes. Our experts closely studied the contract management systems and processes in place for this company, and identified various inefficiencies, challenges, and shortcomings, and determined the cause as the lack of a proper contract management plan. SpendEdge experts provided the eCommerce company with detailed insights into the value of a contract management plan, and helped their professionals understand the process of researching, establishing, and following a plan to improve partnerships and strategic relationships. This led to the company re-negotiating various contracts, identifying better partners, and developing stronger relationships.