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Jul 10

Procurement Contracts

By Procurement No Comments

Procurement contracts are more than mere pieces of paper requiring a signature; they are the bedrock of successful business transactions and play a vital role in procurement.

What is a Procurement Contract?

A procurement contract is an agreement between a buyer and a supplier to manage a project. This agreement obligates the supplier to provide the necessary materials and services at an agreed price, providing the foundation for successful project execution.

The Procurement Process: More Than Just Buying

The procurement process often starts with the buyer, who must determine whether a potential supplier can meet their needs. Through this process, the most suitable supplier for a project is selected, helping to minimize procurement fraud and misunderstandings down the line.

Why Are Procurement Contracts Important?

Procurement contracts are crucial to business transactions. They contain all negotiated terms and conditions, including payment details, a list of orders, delivery schedules, and correction measures. By fostering trust between the buyer and supplier, these contracts safeguard both parties from fraud and misrepresentation, ensuring smooth project management.

Advantages of Procurement Contracts

  1. Transparency: Procurement contracts establish transparency between the buyer and supplier, preventing deception and building a solid relationship. Full disclosure of prices and receipts strengthens the bond between both parties.
  2. Clarity: With everything stipulated in the contract, misunderstandings are minimized. Both the buyer and supplier understand their obligations, promoting cooperation and diligence in their performance.
  3. Legal Protection: Both parties are liable to perform their duties under the contract. Legal actions can be taken against a party that intends to defraud, providing safety in every business transaction.

Different Types of Procurement Contracts

  1. Fixed-price Contract: This is the most common type of contract used in business transactions. Regardless of any internal or external factors, the price set during the signing of the contract remains constant until the project ends.
  2. Cost-reimbursement Contracts: Here, the buyer agrees to pay the supplier for the direct and indirect costs of the project. The supplier only gets paid once the expenses have been validated, placing much of the risk on the supplier’s side.
  3. Time and Materials Contract: This type of contract reimburses the vendor for the materials and time spent on a project. It is most commonly used on projects that are not easily quantifiable.

With the rise of technology, procurement processes are becoming increasingly streamlined and data-driven, leading to optimized spending and reduced risk.

Tools like Icertis and SAP Ariba’s Contract Management Software are revolutionizing this space by providing contract intelligence and services that drive compliance, minimize risk, and maximize business impact.

In an ever-evolving business landscape, understanding and leveraging the power of procurement contracts is a vital strategy for any organization, particularly for finance and procurement executives in the midmarket and large enterprise space.

 

Click here to contact our team

Jun 14
procurement managed services for PE

The Undeniable Value of Procurement Managed Services for Portfolio Performance

By Private Equity No Comments

Operating partners always search for innovative strategies to optimize portfolio companies’ performance.

Procurement, an often-overlooked area, presents a remarkable opportunity for cost optimization and improved operational efficiency.

The key lies in procurement-managed services.

The Game-Changing Nature of Managed Services

Managed services bring a fresh, data-driven strategy to procurement, transforming this traditionally administrative function into a powerful value driver. Backed by cutting-edge analytics and deep industry expertise, these services rapidly become a game-changer in procurement.

The Power of Intelligent Buying and Smart Spending

By shifting to managed services, one can realize an immediate 8% to 12% reduction in purchase costs. This is enabled by sophisticated analytics and a network of experienced procurement professionals who provide comprehensive support.

The approach is all about intelligent buying and wise spending, delivering sustainable savings across all spending categories.

Leveraging Volume Aggregation and Expert Insight

Managed services offer the advantage of volume aggregation and expert insight.

By aggregating demands from multiple clients, they can negotiate better prices, particularly in low-spend areas. Moreover, their scale provides deep expertise and real-time market insights across various categories, allowing us to learn from industry leaders and enhance our capabilities.

The Significant Cost Savings of Strategic Procurement Activities

The potential cost savings from strategic procurement activities are significant.

Consider this: one company slashed its operating costs by 19% by outsourcing its entire purchasing function. Another firm captured average savings of almost a third in its first three significant categories tackled following establishing a new central purchasing function.

The Need for a Well-Informed Perspective in Transitioning

Yet, like any strategic decision, moving to procurement-managed services must be made with a well-informed perspective. While effective for transactional activities, labor arbitrage can limit savings in strategic buying activities that require close internal cooperation.

Capturing the benefits of demand and specification management, which can account for 40 to 50 percent of total savings, also requires close collaboration with other business functions, which can be challenging for an outsourced provider.

The Transformational Impact of Procurement Managed Services

Procurement-managed services represent a significant opportunity for operating partners.

Leveraging advanced analytics, expert knowledge, and industry best practices can transform the procurement function of your portfolio companies into a strategic asset.

As always, it’s essential to approach this with a clear understanding of your portfolio companies’ unique needs and capabilities to ensure a successful transition.

As an SAP Ariba™ Gold Partner, Premikati is a leading services provider for all facets of Ariba™ and procurement in general.  To contact our team, click here.

Apr 04

Contract Lifecycle Management

By Procurement No Comments

Contracts are the backbone of modern business. They serve as the foundation for relationships between parties, whether it’s a company and its employees, a supplier and a customer, or a vendor and a partner. However, managing contracts can be a complex and time-consuming process. This is where Contract Lifecycle Management (CLM) comes in.

CLM is the process of managing contracts from initiation through execution, all the way to termination. It’s a crucial component of any business, ensuring that contracts are well-structured, compliant, and ultimately, profitable. In this article, we’ll delve into the key aspects of CLM and how it can benefit your organization.

The Lifecycle of a Contract

Before we delve into CLM, it’s important to understand the different stages of a contract’s lifecycle. There are typically four phases of a contract lifecycle:

  1. Initiation: This is the stage where a need for a contract is identified. It could be a request for proposal (RFP) from a vendor or an employment agreement for a new employee. During this stage, parties define the scope of the contract, identify the key stakeholders, and establish the terms and conditions.
  2. Negotiation: Once the scope and terms are defined, the parties negotiate to reach an agreement. This is where the details of the contract are fleshed out, including payment terms, delivery schedules, and service level agreements (SLAs).
  3. Execution: Once the parties have agreed to the terms, the contract is executed. This involves signing the agreement and exchanging copies with all parties involved. During this stage, it’s important to ensure that all parties understand their obligations and that the contract is compliant with all relevant laws and regulations.
  4. Termination: Finally, when the contract reaches the end of its term or when the parties decide to terminate it, the contract is closed. This may involve a handover of services, payment of any outstanding fees, and the return of any assets.

The Benefits of CLM

  1. Increased Efficiency: By streamlining the contract process, CLM can save time and increase efficiency. Automated workflows can ensure that tasks are completed in a timely manner, reducing the risk of delays and errors.
  2. Improved Compliance: CLM can ensure that contracts are compliant with relevant laws and regulations. This is particularly important in industries such as healthcare and finance, where non-compliance can result in significant penalties.
  3. Better Visibility: With CLM, all parties involved in the contract have access to the same information, providing greater visibility into the contract process. This can help to prevent misunderstandings and disputes.
  4. Reduced Risk: By ensuring that contracts are well-structured and compliant, CLM can help to reduce the risk of legal disputes and financial losses. This is particularly important for high-value contracts and those with long-term commitments.
  5. Increased Agility: With CLM, contracts can be easily updated and modified as business needs change. This can help to ensure that contracts remain relevant and beneficial to all parties involved.

In today’s fast-paced business environment, effective contract management is essential. By implementing CLM, organizations can streamline the contract process, improve compliance, reduce risk, and increase efficiency. Whether you’re a small business or a large enterprise, CLM can help you to manage contracts more effectively, ultimately driving profitability and success.

 

For your large enterprise CLM needs, visit our partner Icertis at www.icertis.com

Apr 04

Contracts of Adhesion

By Procurement No Comments

Contracts are essential documents in business and legal transactions. They help to establish the terms of a relationship between two or more parties and can provide a framework for resolving disputes. One type of contract that is becoming increasingly common is the contract of adhesion. In this blog, we will discuss the benefits and enforceability of a contract of adhesion and provide a list of key points to consider when using this type of contract.

What is a Contract of Adhesion?

A contract of adhesion is a standardized form of agreement that is offered to one party with little or no ability to negotiate the terms of the agreement. These types of contracts are typically found in consumer transactions such as insurance policies, software licensing, and car rentals. The terms of the agreement are usually non-negotiable, and the party with less bargaining power must accept the contract’s terms to obtain the desired goods or services.

Benefits of a Contract of Adhesion

  1. Standardization: Contracts of adhesion provide a standardized form of agreement that is easy to understand and use. This can save time and money for both parties involved in the transaction since they do not have to negotiate the terms of the agreement.
  2. Accessibility: These contracts are usually written in plain language, making them more accessible to consumers who may not have a legal background. This can help to promote transparency and fairness in the transaction.
  3. Prevents Surprises: Standard form contracts can help to prevent any surprises or hidden clauses that may be detrimental to the party’s interests.

Enforceability of a Contract of Adhesion

  1. Legal: Courts generally consider contracts of adhesion to be legal as long as they are not unconscionable or violate public policy. In the United States, for example, courts have ruled that such contracts are legal as long as they meet certain standards of fairness and transparency.
  2. Opportunity to Review: Courts will consider whether the party with less bargaining power had the opportunity to review the terms of the agreement before signing it.
  3. Unconscionable: If the terms of the contract are unconscionable or shock the conscience, a court may find the contract unenforceable.

Key Points to Consider When Using a Contract of Adhesion

  1. Understand the terms of the contract: It is essential to review and understand the terms of the contract before signing it. Make sure you understand what you are agreeing to and what your obligations are under the agreement.
  2. Seek legal advice: If you have any questions or concerns about the contract, it is advisable to seek legal advice before signing it.
  3. Negotiate where possible: While the terms of a contract of adhesion are typically non-negotiable, it may be possible to negotiate certain terms. It is worth exploring this option before signing the contract.
  4. Consider the consequences: Think about the potential consequences of signing the contract. Consider what would happen if the other party breaches the agreement or if you are unable to fulfill your obligations under the contract.

Contracts of adhesion can offer both benefits and drawbacks to parties involved in a transaction. While they provide a standardized and accessible form of agreement, the party with less bargaining power may be at a disadvantage if they do not fully understand the terms of the contract. It is essential to review and understand the terms of a contract of adhesion before signing it, seek legal advice if necessary, and consider the potential consequences of signing the agreement.

 

For your large enterprise CLM needs, visit our partner Icertis at www.icertis.com

Apr 04

Contract Management Software

By Procurement No Comments

What is contract management software? Contract management software is a tool that automates and centralizes the management of contracts. It enables businesses to track, manage, and analyze the lifecycle of contracts from creation to renewal. The software provides a comprehensive solution for managing contracts, including drafting, negotiating, approving, executing, and archiving them.

Benefits of contract management software:

  1. Improved efficiency: Contract management software can help businesses automate manual processes and reduce the time and effort required to manage contracts. It can also help to eliminate errors and inconsistencies that can occur in manual processes.
  2. Increased visibility: Contract management software provides a centralized repository for all contracts, making it easier for businesses to access and track their contracts. It can also provide real-time alerts and notifications, helping organizations to stay on top of important deadlines and milestones.
  3. Better collaboration: Contract management software can facilitate collaboration between different teams and stakeholders involved in the contract management process. It can enable multiple users to access and work on the same contract simultaneously, ensuring that everyone is on the same page.
  4. Risk reduction: Contract management software can help businesses to mitigate risks associated with contracts, such as compliance issues, contractual disputes, and missed deadlines. It can provide businesses with the tools they need to manage contracts more effectively, reducing the risk of legal or financial penalties.
  5. Cost savings: Contract management software can help businesses to reduce costs associated with contract management by eliminating the need for manual processes, reducing the risk of errors, and optimizing contract terms and negotiations.

Features of contract management software:

  1. Contract authoring and drafting: Contract management software provides tools for creating and editing contracts, including templates, clauses, and workflows.
  2. Contract storage and retrieval: Contract management software provides a centralized repository for storing and retrieving contracts, enabling businesses to easily access and manage their contracts.
  3. Contract tracking and monitoring: Contract management software provides real-time alerts and notifications, enabling businesses to track and monitor important deadlines, milestones, and obligations.
  4. Contract negotiation and approval: Contract management software provides tools for negotiating and approving contracts, including electronic signature capabilities.
  5. Contract analysis and reporting: Contract management software provides tools for analyzing and reporting on contract data, including contract performance, compliance, and risk management.

Contract management software can provide businesses with the tools they need to manage their contracts more effectively, reducing the risk of legal and financial penalties, and optimizing contract terms and negotiations. By automating and centralizing the contract management process, businesses can improve efficiency, increase visibility, facilitate collaboration, reduce risk, and save costs. 

 

For your large enterprise CLM needs, visit our partner Icertis at www.icertis.com

Apr 03

Contract Trends in 2023

By Procurement No Comments

Contract management is a critical aspect of any organization’s operations, and it’s especially important for executives who are responsible for managing the financial health of their organizations. Effective contract management can help you mitigate risk, increase revenue, and reduce costs, but it can also be a complex and time-consuming process. In this post, we’ll explore the top five pain points that businesses like yours face with regard to contract management, and we’ll provide some best-in-class solutions to help address these challenges. 

 

Lack of visibility into contract terms and obligations 

 

One of the biggest challenges with regard to contract management is the lack of visibility into contract terms and obligations. This can result in missed opportunities to save money, increase revenue, or mitigate risk.

Best-in-class solutions for this challenge include contract lifecycle management (CLM) software that centralizes all contracts in a single repository and provides advanced search and reporting capabilities. With CLM software, you and your team can easily access all contract data, including key terms, obligations, and milestones, and they can quickly generate reports to help them make informed decisions. 

According to a report by the International Association for Contract and Commercial Management (IACCM), companies implementing CLM software can reduce contract cycle times by 50% and increase compliance by 80%. 

 

Inefficient contract creation and negotiation processes 

 

Creating and negotiating contracts can be a time-consuming and inefficient process, especially when done manually.

Best-in-class solutions for this challenge include contract authoring software that streamlines the contract creation process and automates workflows – which can easily help you create contracts using pre-approved templates and standardized language, and automate workflows to ensure that contracts are reviewed and approved in a timely manner. 

 A study by Aberdeen Group found that companies that use contract authoring software can reduce contract cycle times by 50% and increase contract accuracy by 90%. 

 

Poor contract management workflow and process 

 

Inefficient workflows and processes for managing contracts can lead to delays, missed deadlines, and increased risk. CLM software can easily manage contract workflows and approvals, as well as receive automated alerts for key contract milestones and renewal dates. 

According to a report by the IACCM, companies that implement CLM software can reduce cycle times by up to 50%, increase compliance by up to 80%, and reduce legal costs by up to 30%. 

 

Poor contract compliance and governance

 

According to a study by Forrester, companies that use CLM software can reduce legal costs by up to 30% and increase compliance by up to 70%. 

While contract compliance and governance can be a complex and time-consuming process. Best-in-class solutions for this challenge include CLM software that provides automated compliance and governance workflows, as well as real-time alerts for non-compliant activities. 

 

Limited scalability and flexibility 

 

Scalability is a concern for any growing business.  Solutions like SAP Ariba CLM or ICertis CLM software provide scalability and flexibility, as well as customizable workflows and integrations with other business systems. These will ensure your contract management processes can adapt to changing needs, reducing risk and increasing efficiency. 

 

To learn more about:

Contract management and its impact on procurement click here. 

Complex contract management solutions click here.

 

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