Ariba's Spend Management Days in North America and Europe this fall have been focused on 'The New Normal' and how what's normal has permanently changed for many organizations. Based on this theme, Ariba will be publishing a new white paper in the coming days focused on how normal has changed in regards to the contract management function. For those interested, below is a brief excerpt from the paper. Check back to this site in the next several days to download the paper in its entirety.
Also, I encourage those of you tasked with responsibilities in the contracting functional area to vote in the poll on this page as we track the impact of this change. For those who vote in the 'Other' category, use this posting as a thread for comments on the topic - what does 'The New Normal' mean to you and your organization?
Excerpt from Lessons Learned from the Recession: Contract Management, November 2009:
Build relationships with trading partners. With Bankruptcy rates reaching all time highs in 2009, it is critical that the 'partner' is but back into 'trading partner'. No longer can buyers bleed suppliers to the point of unprofitability. Customers who fail to deliver on promised services levels will not gain preferred customer status and may be left out in the cold with restricting levels of inventory on the horizon - an expected result of the economic slowdown already being felt in many commodities. Practices measuring contract managers / negotiators on acceptance or non-acceptance of T's and C's will result in strained relationships from the very initiation of contract fulfillment. In this challenging economic environment, agreements that benefit both sides should be the goal in contract negotiation and execution.
How can you put these concepts into practice? A good exercise is to revisit your legal clauses and re-prioritize those that truly are critical vs. those that can be bent or forfeited under some circumstances. Find out which clauses are most often updated. These may be too restrictive and difficult for your trading partners to accept. Modify the frequently edited clauses and/or create alternative clauses making sure the risks associated with the clause are fairly allocated between the parties. Additional flexibility on both sides will almost certainly result in a more positive customer - supplier relationship.