Contracting agreements protect companies & deliver results
Risks and uncertainty cause business failure so you need contractual agreements that protect your supply chains
Note: 4.0/5 (1 notes) 221 students
Instructor(s): Steve Wills
Supplier Contract Overview
A supplier contract is a legal agreement between a business and a supplier to establish the delivery of a set of products or services. Such agreements are used as a means by which to measure the performance of the supplier. In addition to itemizing the materials to be supplied, the supply contract will establish the responsibilities, timeframes, payment, and pricing for the deal.
If properly executed, the supplier contract will help you derive the most value from the supplier relationship. Also, by requiring one, you will compel your external suppliers to take their relationship with you more seriously. It will also make managing your suppliers easier. For these reasons, this contract should be used any time that purchasing from suppliers is necessary.
Tips for Successfully Managing Supplier Contracts
You will likely have to manage multiple supplier contracts at once for your business. Not having a good system for doing so can lead to much frustration for both you and your suppliers, as well as the potential for decreased efficiency and increased project costs. The following tips can help you avoid this:
Begin each buyer/supplier relationship by clearly establishing who is managing the deal and who will be the primary contact person.
If you are running a moderate- to large-sized business, creating a small team to handle supplier contracts may be helpful.
Use a formal screening process to choose your suppliers. A standardized system will reduce human error ad ensure vendors are chosen fairly.
Keep supplier contracts in a shared database for easy access by managers or other concerned individuals. Contract management software may help you do this.
Having a good relationship with suppliers can also help with contract management. Treating the relationship as a true partnership can help you effectively manage costs and maintain project schedules and quality standards, since the suppliers may be more willing to go the extra mile for you. Maintaining a healthy supplier relationship can be achieved in part by:
Maintaining open lines of communication.
Using contract review to evaluate performance or solve problems should they arise.
Identifying and acting upon opportunities to develop new goals together.
Treating the supplier fairly and avoiding duplicitous behaviour.