As we’ve seen since the beginning of the coronavirus pandemic, we are inextricably tied to a global supply chain that can abruptly break down without warning.
For instance, since March, certain everyday products have been in short supply—paper towels, hand sanitizer, disinfectant spray—while products we have rarely needed before—like surgical masks and latex gloves—are now at the top of our shopping lists, but are equally difficult to find.
But when Dad can’t find hand sanitizer at his local pharmacy, he simply tries the store next door or looks to buy online. It’s not that easy if you’re in charge of buying for a large organization. When a factory can’t find critical parts, its procurement manager can’t just look on Amazon. With orders going unfulfilled due to stock shortages or postponed deliveries, many procurement leaders have found themselves desperately trying to get in touch with their suppliers to change orders, check on additional inventory, or come up with alternate deliveries.
Amid these new supply chain challenges, a company’s contract management system (CMS) has become more important than ever before. Our panel of experts covered this very topic in one of our recent webinars, Procurement and supply chain: Today’s most crucial coalition.
A CMS is a software platform that helps companies manage the production and maintenance of their contracts, service-level agreements, and procurement master agreements. Among other things, a good contract management system is a central repository for the company’s standardized contracts, a tool for drafting and executing new contracts, and a tracking system for the overall contract cycle.
Contracts are critical to an organization’s procurement function—setting out prices, terms, service levels, and other parts of the supplier relationship—so they shouldn’t just be left in a drawer in the general counsel’s office. They need to be referred to on an ongoing basis and used as a living business document rather than a legal archive.
In the middle of a crisis, a good CMS will alert the company to unexpected behavior at its suppliers, help detect and manage insurance claims when contract terms aren’t fulfilled and identify suppliers with the greatest risk potential. At the very least, your CMS should be able to tell you who to call at your suppliers, in case of an emergency.
That’s why it’s important to make sure your CMS is working effectively. No crucial piece of technology is any good at all if it’s not up to date and accessible. During the early days of the pandemic, some procurement leaders found this out the hard way.
Businesses have been talking about digitization for years, but the coronavirus crisis has forced companies to go all-in.
At the beginning of the pandemic, many procurement managers reached for their supplier contracts to check their force majeure clauses to see what constituted unforeseeable circumstances. But even if those contracts were stored digitally, that didn’t mean the info they contained was accessible. A Jpeg file of a paper contract sitting on your general counsel’s hard drive may technically be a “digital” contract, but it isn’t at all useful when your procurement manager is working remotely and needs to access it to weigh every option.
A big lesson from the pandemic has been to make sure you’re appropriately digitized so that everything you need is accessible and that your processes are robust enough to operate under a wide range of conditions. For the contents of a contract to be useful, it must be centralized and accessible to everyone. That means, ideally, having a cloud-based CMS, but at the very least you need one that can be accessed remotely.
While digitizing data is the focus of the moment, organizations need to make sure the data they’re storing is as up-to-date as possible. If a company’s data isn’t near perfect, they’ll be paying for it in times of crisis. A CMS should include all of your most recent contract terms, and your supplier’s contact details should all be checked and double-checked.
Simply keeping all of your information and contacts current may seem like Data Storage 101, but nailing the basics will make it easier to do business in the middle of a global crisis like the one we’re living through.