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5 tips for effective contract management in the manufacturing industry

Productielijn-machinelijn

Contract management in the manufacturing industry is becoming increasingly important. Due to the increasing complexity of supply chains, keeping track of and recording current contracts is essential. In addition, digital contract management is an important part of an efficient supply chain.

Yet research shows that many companies do not yet have suitable systems for this, contacts often roam through inboxes, several local computers or simply are not there. In this blog I will give you 4 tips on how you as a buyer can use effective contract management to optimize your purchasing process!

The tips:

  1. Determine what you want to get out of your contracts
  2. Build a contact registration structure
  3. Create an evaluation system for current contracts
  4. Spend more time on supplier management
  5. Digitize the entire process

1. Determine what you want to get out of your contracts.

Start at the beginning, discuss what your organization needs contracts for. Think of delivery agreements, but also the protection of projects, documents, communication, drawings and ideas? It is also good to determine whether there really should be a contract with every supplier or whether a certain segment is sufficient.

Nobody likes unnecessary paperwork, so be critical! Also look closely at the past. Where did agreements go wrong before, and who was responsible? By having this clear, you can communicate more clearly in your role as contract manager and limit the chance of friction with your suppliers.

2. Build a contract registration system

Provided you do not already have this within your ERP system, this is essential. Keep track of which contracts and agreements they have current per supplier, per relevant period. Also include notifications for contracts that are about to expire or that are automatically extended.

Ultimately, it's about being able to get to the right contract quickly, should a discussion arise. Also make sure that you keep the administration in a cloud environment. On the one hand you ensure that you can quickly share documents with relevant parties, on the other hand you do not lose your contracts in the event of a crash of your hard drive.

3. Evaluate standardized agreements

Mistakes are always made, the trick is to make this measurable. Keep an impartial and honest record of where bottlenecks arise, what causes them, and decide in advance what to do if this happens.

Also keep communicating with your partners, sometimes there is more value in solving a problem together than in immediately dropping a collaboration. In addition, it is always good to know mutually in negotiations where there are areas for improvement.

4. Spend more time on supplier management

Supplier management refers to all actions you take to improve or maintain a partnership with a supplier. Action is often only taken when something goes wrong, so always from a negative trigger.

It also pays to contact us if things are going well, or just once a quarter to check how things are going with your partner. Maybe they run into things you don't know about, or they plan to cancel the contract while you are extremely satisfied. Both are useful to include in your further strategy!

5. Digitize the entire process

In the current working method, contracts are often printed out, signed and scanned again and sent. More and more tools are becoming available that allow this digitally with a digital signature.

A digital signature (also called electronic signature or e-signature) is the digital replacement for the 'wet', handwritten signature. By digitizing these processes, you reduce costs, save time and improve communication. For more information, see this blog about NDA/disclosure.

Where do I begin?

At the beginning! Carefully go through these tips and try to set long-term goals per point. There are online platforms such as Tech2B available that can help you with many of the above tips. Digital signing, central cloud storage and clear preferred supplier lists are a few examples of this.

If you would also like to be helped on your way with Tech2B, you can get started here!