Legacy vs. New Age Contract Management – Waging war in Middle East Procurement
Stuck in a bad contract? Missing out on possible negotiations? Getting the wrong supplier? These are a few of the weapons that dent the armor of procurement professional. With the changing business environment and repeated supplier related scandals, it has become essential for the organizations to manage contracts effectively. So how exactly have the traditional methods developed cracks?
Handling contracts manually meant guaranteed risks and yet it is one of the most widely used systems. Let’s have a look at how the decentralized legacy system of manually handling paper-based contracts is losing the war:
- Low visibility
In a decentralized environment, the data is scattered along the various business units making the contracts prone to low visibility. This brings along various bottlenecks like lack of contract ownership, altered contracting terms, lack of proper approval workflows and so on leading to low collaboration across sourcing & contracting teams. Additionally tracking a contract through its stages, approvals and terms was almost nonexistent.
One of the key issues that low visibility leads to is low compliance. In such situations, maverick spend takes charge and often the price paid is different from the price negotiated. Moreover, manual handling also meant that there was no contract repository, thus tracking an existing contract or rather a misplaced contract was one herculean task.
Studies show that a number of failed contracts were made as a result of lack of standardization. Vague clauses/conditions not pertaining to the department, lack of customized clauses, and geographical rules and regulations are the factors that aided the low standardization.
- Long Cycle Time
The paper based approach lead to long cycle times when approvals, negotiations or signatures came into picture. This resulted in unwanted delays leading to long cycle times.
In our next post we shall look how we can fill the cracks that the legacy systems have bought.
Have you faced a similar crack? Share your views in the comments section below.