We would venture to say that all businesses from various industries in the public and private sectors need vendors. Vendor relationships help power business processes. Vendors can provide supplies, services, maintenance, and raw materials for generating products. As such, it is important that organizations maintain business relationships with third-party vendors.
Unfortunately – as is the case with most things – there is a right and a wrong way to go about vendor management.
Contract and procurement teams need to sidestep spend leakage, detrimental terms, and soured vendor relationships. On the other hand, proper vendor contract management can set the stage for positive growth and opportunity realization. Here’s how.
Vendor contract management involves overseeing vendor agreements that outline the mutual expectations of a vendor relationship. Vendor contract parties:
Let’s explore how to foster healthy vendor relationships and manage vendor contracts correctly.
Mutual clarity and understanding regarding a vendor relationship is critical in maintaining healthy business operations.
Even before a vendor agreement is considered – a bid process must be detailed, streamlined, and designed to find the perfect vendor. For example, organizations can leverage integrated vendor and contract management software to source vendors online with automated emails.
Registered bidding organizations should be quickly notified based upon assigned products, services, or commodity codes. A web-enabled portal for vendor and supplier participation makes finding the right vendor even easier.
Depending on a team’s needs, they should decide whether to make a bid opportunity private or public-facing. This choice will depend on what the organization feels will be the best course of action given the prospective vendor relationship.
Once an organization has found a vendor, there must be a healthy dialogue about the expectations of a vendor contract.
Regarding expectations, a vendor contract should serve to answer – to start – the following questions:
HOT TIP: Create vendor contracts with ease with contract templates. Using templates within a contract repository can easily merge contract metadata with tidy sections and clauses.
A vendor contract should specify:
Circling back to the hot tip above – merged metadata and clause fields make this easy! Things are especially easy with the use of contract AI that has learned from thousands of important contracts and clauses.
Companies should consider the cost of a vendor contract. Vendor and contract lifecycle management software can help supplement cost analysis with:
Additionally, market research should be performed to help ensure a company is saving costs if they continue with a vendor contract.
BUT DON’T GET GREEDY!
Building healthy vendor relationships is not possible with hardline negotiations that strictly prioritize the client engaging with a vendor. Instead, a client should try to create a contract that is mutually beneficial to both parties. Negotiating terms that make both a client and a vendor happy supplements a long and fruitful business relationship.
Legal provisions and tangible applications of a vendor contract must be clear. Both parties need to know what needs to be done in vendor contract management. Some logistics to explore are:
Specified logistics within a contract for both vendors and clients greatly diminishes the chances of confusion or failure to meet obligations.
Building lasting relationships with high-quality vendors will foster broad success. This strategy is preferable to enlisting vendors one-off and then throwing a relationship in the trash once terms are fulfilled.
Building a base of trusted vendors can lead to better contract terms in the future – and almost exponential opportunity.
Integrated vendor and contract lifecycle software can help with tracking contracts to choose vendors that meet performance metrics.
Vendor contract management software can allow teams to auto-renew contracts after a certain timeframe. Additionally, automated reminders and calendar alerts for renewal opportunities can foster renewal oversight. Rapid electronic signature processes can automate the signing of vendor agreements set for renewal.
The features and strategies above are a scratch at the surface of what you can do to build healthy vendor relationships. Furthermore, the tools mentioned above and more are available with CobbleStone Contract Insight®. CobbleStone’s one-stop contract, vendor management, and procurement solution can help you supercharge your vendor relationships with award-winning tools.
But don’t take our word for it. Check out these case studies.
Book a free demo with a CobbleStone expert to see how to easily oversee contract and vendor management. Ready to try CobbleStone out for yourself? Enjoy a free trial of CobbleStone Software today.
*Legal Disclaimer: This article is not legal advice. The content of this article is for educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorneys for legal advice regarding any particular legal matter.