Building An Effective Contracting Process
Recently Wal-Mart issued a Zero Tolerance policy for suppliers subcontracting work. In another incident, Tesco severed ties with its horsemeat supplier. These events highlight the importance of contract governance at a time when the business is volatile & the supply chain has gone global.
Contract management plays an important role in maintaining an effective and competitive supply chain. More often than not, procurement professionals give more weightage to finding suppliers, and negotiating the terms & conditions as compared to managing contracts. Even though finding and awarding the correct suppliers is crucial, the effort put into it can be undone if the contracts are not managed effectively.
Organizations have long used contracts to conduct business. It provides the framework within which the organization carries out activities and tries to mitigate risks. Today, with a constant battle with the competitors to stay ahead and maintain a sound profit margin companies need to source from across the globe to save on cost and at the same time keep an eye on tight regulatory norms. This further increases the need for a well defined and well managed contracting process.