Companies interact with their suppliers in a whole range of ways. These interactions take place at many different points in the supply chain, but they are all part of the same process: keeping supply chains integrated and moving goods efficiently through them. In this blog post, we’ll discuss what contract lifecycle management is, its benefits and its pros and cons. If you are interested in learning more about integrating your contracts with other company processes, check out our other blog posts on the subject.
What is Contract Life Cycle Management?
Simply put, contract lifecycle management (CLCM) is a process that all parties involved in the supply chain use to manage the length of time goods are in stock and, more importantly, the timelines for their shipment. This includes all parties from the manufacturer to the distributor to the store owner. CLCM requires all participants to work together to ensure products reach their destination safely and efficiently.
How Does Contract Life Cycle Management Work?
The basic concept of contract life cycle management is that companies maintain contracts with vendors that specify the goods and services that will be provided to them. Once a contract is in place, the parties involved can follow a series of steps to make sure that the contract is fulfilled to the letter. For example, a contract with an initial period of six months may be renewed every six months on the same terms and conditions.
Similarly, if a vendor breaches the contract, the parties can mutually agree to terminate the contract and obtain a buy-back option. The key aspect of a successful contract life cycle management system is transparency. All parties should be aware of the times, dates and places at which goods will be delivered, and their agreed-upon status. In addition, all parties should be able to see at a glance whether a particular vendor is complying with its obligations. This is particularly important for smaller companies that may not have the infrastructure to keep in touch with every nuance of a large multinational customer.
What are the benefits of using Contract Life Cycle Management?
By following a proven strategy, companies can integrate their existing supply chains and improve their operational efficiency. A number of benefits can come from using this strategy, such as Closing loops: CLCM helps to close some of the entry points into the supply chain. This includes the customer journey, the manufacturer-supplier relationship, and the distribution channel.
Improved customer experience: Through the effective use of RFID, companies can improve the customer journey and expedite the service delivery process. For example, retailers can stock more products, have better inventory management and customer service can reach faster after-service problems. Better product safety: RFID tags can be used to track the movement of goods and help to identify and trace manufacturing defects. This in turn can help to ensure that faulty goods are immediately removed from circulation and not sold or used by others.
Increased revenue: As a primary goal, CLCM brings transparency and integrity to the supply chain. Through effective use of RFID, all parties should be able to see at a glance whether their suppliers are complying with their obligations. This helps to quickly and efficiently take corrective actions, if necessary.
What are the cons of using Contract Life Cycle Management?
Some of the significant challenges that companies will face when implementing CLCM include:
Finding the right contracting solution: As discussed above, finding the right solution can be challenging. There are many well-established and proven supply chain management tools that could potentially work with CLCM, but they are not always easy or intuitive to use.
Understanding the full lifecycle of a product: One of the biggest challenges that companies will face when implementing CLCM is to understand the full lifecycle of a product. For example, how long will an engine lasts before it is required to be replaced by the manufacturer? Or, how long does a refrigerator stay in the store before it is sold?
Getting buy-back guarantees: Some companies may want to ensure that their suppliers keep providing quality goods and services. To do this, some vendors may require a buy-back option after a period of time has elapsed. This could create a problem for smaller companies that do not have the spending power to buy back all the products they sold each month.
As the demand for goods and services continues to grow, so will the need for efficient and transparent supply chains. To meet this demand, companies can use a variety of tools to integrate their supply chains. One of these tools is called contract life cycle management. This can help to ensure that goods reach their destination safely and efficiently, as well as contribute to a better customer experience.