SIMPLIFYING CONTRACT NEGOTIATIONS
As organizations seek to drive greater efficiency and value from their trading relationships, there is a constant pressure to simplify contracts and negotiate and at the same time reduce the cycle time for contract creation. The shift to an increasingly services-based economy is resulting in major changes in the contracting strategies. The shift is also having a considerable impact on the structuring of commercial offerings and on management of risk. This blog explores the ways to simplify the contracting process and identifying the factors that help in better negotiations.
Simplification of contract creation and reduction in the cycle time for creation of contracts can be largely facilitated by automating the contract management process. Contract Management solutions provide the necessary capability to reduce contract creation cycle time through use of templates,standardized clauses and by automating the approval process through efficient workflows.
The Negotiation terms are to be decided and dealt by the companies with the suppliers. Streamlining and optimizing negotiations continue to be an area generating significant return. We will now explore the Key Result Areas to be considered for simplifying the negotiations. These are:
- Value: The core value to the business for which the contract/deal is initiated. Also, any additional value that may be derived from such deal.
- Risk: All business process and trading relationships carry a certain amount of risk. The amount of risk that is affordable needs to be evaluated and mitigation possibilities need to be explored.
- Innovation: In today’s dynamic business environment, innovation is synonymous with success. Innovation can be in the contracting process, contracting terms or in the benefits or values to be acquired through the business dealings for which the contract is being enforced.
Once we have identified the above mentioned key result areas for negotiation, we need to make sure that the negotiation is done with a collaborative approach. Ensuring a collaborative approach will also make the negotiator a facilitator for mutual benefits and will insure adaptive terms from the suppliers to facilitate fulfillment of the dynamic needs of the business in the future. Repetitive and low value negotiations are no longer affordable and must be avoided.
To get a Practitioners view on‘Means to simplifying Contract Negotiation’, Access Horizon 2013, where John Fenton, Attorney and Sr. Contract Manager, Purchasing & Supply Chain Management group at Cincinnati Bell shared insights into:
- An increasing focus on industry and commercial standards.
- Strategies for reducing low value negotiations and reducing cycle time
- An increased use of technology in the negotiations process