Supplier contract management is an important part of sourcing and onboarding suppliers. Discover what it is, and how to do it effectively.
What is supplier contract management?
Supplier contract management describes creating, negotiating, executing, and monitoring agreements between a company and its suppliers. These contracts outline the terms and conditions of the business relationship, including pricing, delivery schedules, quality standards, performance metrics, and more.
Many of the typical contract management best practices apply to supplier contracts. However, there are a few important differences between supplier contracts and other types of business contracts, including that:
- They are more likely to be renewed than some other contracts, especially if both sides have a positive experience working together
- They tend to include strict delivery deadlines, while some contracts leave this open-ended
- They tend to be managed at scale, with many businesses partnering with several different providers for various goods and services
This means that there are a few, additional tips procurement teams should consider when managing supplier contracts in 2024. Let’s explore what these are now.
Supplier contract management tips for 2024
1. Vet potential suppliers
Before entering into a contract, you need to make sure the supplier you’re contracting with is the right one. This means you’ll need to vet them carefully, identifying any risks and red flags that might make the supplier unreliable and unsuitable for your needs.
When doing this, you should consider their financial stability, reputation, and track record when it comes to performance. It’s also a good idea to find out whether they’re already working with businesses like yours, and what those partners think.
Evaluating potential suppliers effectively can derisk your contracts, allowing you to select reliable partners and reduce the likelihood of disruptions and contractual disputes later down the line.
2. Get stakeholder buy-in early on
Approvals can be one of the biggest blockers for supplier contracts. Failing to get buy-in from your internal stakeholders early on will only worsen this, so don’t leave getting their approval until the moment you need their signature.
Instead, focus on getting the relevant stakeholders on calls with the supplier and bring them into the decision-making process from the start. That way, you’ll avoid nasty surprises and unexpected blockers ahead of time, making the supplier contract management process faster and more efficient.
3. Keep your contract terms clear and consistent
The best way to make sure both parties keep to their side of a supplier agreement is to make the contract terms as clear and thorough as possible. That way, all parties know what’s expected of them and what they need to do to perform the contract in full.
Consistency is also important. Relying on standardized or automated contract templates for your supplier agreements can ensure you’re agreeing to favorable terms and taking a consistent approach to supplier relationships. No more worrying about commercial teams drafting their terms, and no more worrying about hidden costs or risks.
4. Track and monitor contract compliance
It’s also important to track contract compliance when managing supplier contracts. This can involve monitoring everything from quality control, to delivery timelines, and other contractual obligations.
However, this can be difficult if you don’t have a single source of truth for contracts and their data. If you want to monitor contract compliance in a faster, more accurate, and more efficient way, you’ll need a centralized contract repository, and ideally, fully searchable contracts.
Not sure where to start? Check out this guide to contract compliance.
5. Maintain relationships with suppliers
Strong supplier relationships are crucial for procurement teams. To avoid disruption, you want to build supplier relationships that can withstand market volatility and renegotiations. There are a few things you can do to maintain these relationships, including:
- Making timely payments to your suppliers
- Streamlining and encouraging communication
- Ensuring the contract terms are mutually beneficial
- Get the relevant stakeholders involved on both sides
- Address challenges and concerns directly
- Manage expectations and be sure to deliver
These vendor management best practices enable you to build a level of trust and rapport with your suppliers, making it easier to do business going forward.
6. Take a proactive approach to renewals
Proactively managing contract renewals allows organizations to negotiate favorable terms, pricing, and conditions before the existing contract expires. This can result in cost savings by avoiding automatic renewals at potentially higher rates or unfavorable terms.
Rather than sitting back and waiting for contracts to expire or automatically renew, a proactive approach to contract renewals involves setting up contract reminders ahead of time, giving parties more time to make strategic decisions about whether (and how) to renew.
To learn more about how to adopt a proactive approach to contract renewals, check out this guide to renewal management.
7. Invest in supplier contract management software
Investing in contract management software can transform the way you manage supplier agreements. With a solution like Juro, procurement teams can create, agree, execute and manage contracts up to 10x faster than traditional tools. Procurement teams using a CLM can benefit from:
- Instant visibility into contract data
- More opportunities to identify cost-savings
- Streamlined supplier onboarding
- Reduced contract admin work
- Faster and more efficient contract workflows
Searching for documents was a time-drain before Juro. Now, I go into Juro daily, and can access all our documents through a simple search - Ulrika Leikvang, Head of Legal, Tibber
Juro’s AI-enabled contract automation platform empowers legal and other business teams to accelerate the creation, execution and management of contracts. To find out more, fill in the form below.