Contract Management (CM), sometimes known as Contract Lifecycle Management (CLM), can be simply defined as the management of contracts made with customers, vendors, or employees. (Wikipedia) From procurement’s perspective, contract management is the process of tracking contracts to determine who you should be ordering from, when, and at what price;
and ensuring that your suppliers are adhering to the agreed upon terms. From a legal perspective, contract management is the process of ensuring that you are using standard terms, that risks are mitigated, and that contracts are in place for at least all key relationships. From a sales perspective, contract management is the process of dotting the i’s, crossing the t’s, and making sure payment terms and dates are clearly specified.
In my first post on contract management, I overviewed some basic features of a C(L)M system, including searchable centralized contract repository, collaborative capabilities, workflow capabilities, monitors, alerts, reporting, and template and clause-based contract creation capabilities. In my second post, I noted that Enterprise Contract (Lifecycle) Management (EC(L)M) offers advanced features beyond basic contract tracking, including collaborative capabilities, workflow capabilities, monitors, alerts, reporting, and template and clause-based contract creation capabilities.
However, I feel I’ve yet to capture the essence of Enterprise Contract Management. An Enterprise Contract (Lifecycle) Management solution is one that captures the holistic view of contract management from the enterprise perspective. It’s a solution that lets you do full Contract Information Management (CIM). Just like a true Supplier Information Management (SIM) solution lets you capture, manage, query, and create initiatives around your supplier information, a Contract Information Management (CIM) solution lets you capture, manage, query, and create initiatives around your contracts and all of the information that pertains to them.
With a true Enterprise Contract (Lifecycle) Management solution, you’re not only managing your contracts, but you’re managing the information that is within the contracts and related to the contracts. It’s being able to not only find the contract for the part you need, but share that information with your sourcing and procurement systems for automated compliance verification of invoices. It’s about being able to not only create standard terms and conditions in your contract templates but being able to annotate them with the reasons therefore. It’s about being able to determine not only what contracts are about to expire, but what risks you are open to with respect to your current contract base with respect to liability, supply stability, and corporate social responsibility. It’s about being able to drill down from a supplier contract into relevant supplier data and performance metrics to determine compliance. It’s about being able to drill down from your customer contracts to your delivery information to determine delivery statistics. It’s about being able to determine whether or not you are violating any labor regulations with respect to your temporary labor or out of compliance with International Labor Organization standards or Corporate Social Responsibility policies. Its about being able to truly manage your operations off of your contracts, and not just about being able to determine compliance and performance after the fact. After all, you can’t be defined by your contracts if you cannot effectively execute against them.
In our next post, we’ll examine Nextance, one of the pioneers in the Enterprise Contract Management movement.