The competitive advantage of contracts is lost in many companies because they don’t take the time to organize them into an enterprise-wide system that can deliver pricing, service and negotiation intelligence. If manufacturers could capitalize on their contracts more efficiently they could gain major advantages in negotiating with channel partners, defining new pricing strategies with suppliers, and have a better grasp of their liabilities. There would be far fewer surprises for many manufacturers if they also had an enterprise-wide contract management system in place as well.
Here are several key lessons learned from companies who have moved from being entirely manual in managing their contracts to automating them into an enterprise-based system:
Managing contracts through cross-functional systems is how the majority of companies are handling this process workflow today. Realizing that having contracts stored on several different peoples’ systems and not cross-referenced leads many manufacturers to initially develop cross-functional approach where portals begin to proliferate. This is where many manufacturers stop their efforts to improve, as contracts are at least searchable, even though it often takes several different portals to find the specific contract of interest.
Defining enterprise-wide systems that can search to the clause level is where highest-performing companies are at in terms of maturity today. Being able to parse contracts to the clause level is critically important as any manufacturer begins to increasingly rely on indirect channels. The fact is that indirect channel strategies lead to the development of an exponentially greater number of contracts and cross-functional, portal-based approaches can’t scale to the level of analysis necessary to support complex channel relationships.
Create standardized processes for managing contracts instead of having individualized and often inconsistent approaches across business units. As is often the case when cross-functional versus enterprise-based approaches to managing contracts, often each business unit will define a completely different approaches to managing dates, commitments, costs and pricing. The net effect of this is that company-wide opportunities are missed to make the most of all contracts enterprise-wide.
Bottom line: Contracts can be a significant competitive advantage if they are managed to be an enterprise-wide asset versus a departmental or division liability or cost of doing business.