Category Archives: contract management

Plain English Contracts Can Be Reasonable

Last year, Dick Locke, who has an entire state on his side, wrote a great post on the importance of plain English in contracts. Then, last month, with the help of The Temp Life (Season 2, Episode 7), I made it very clear what might happen if you don’t follow his advice.

But one aspect of contracts we haven’t tackled yet is that of “reasonableness”. As highlighted in this recent article over on SupplyManagement.com which asks you to “now be reasonable”, these clauses can end up causing more disputes than they ultimately resolve. While they are included in the hopes of raising contentious issues during critical phases of contract negotiations, they simply delay the inevitable because, given enough time, a supply disruption will happen and finger pointing will begin.

The key to preventing disputes is to define precisely what conditions define a breach and what steps each party will take to try and remedy it, in plain English, so there are no disagreements down the line. While it’s true that a contract cannot predict, or define a remedy for, every type of disruption that could happen, it can predict, and define actions for, the most likely disruptions. The use of plain English to define reasonable remedies for these disruptions will prevent problems down the line. This will minimize the chance that the “catch-all” reasonableness clause will need to be invoked, but even if the “catch-all” clause does need to be invoked, if the reconciliation process is defined in plain English (notify, meet, accept, correct, etc.), things will still go smoother than if plain English is not used.

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Intelligent Sourcing through Intesource

Founded in 1999, Intesource is another player in the e-Sourcing / e-Negotiation space, but one with a bit of a twist. Whereas most SaaS providers are trying to sell you the all-powerful self-service fluffy magic box cloud solution, Intesource is still focussed on providing a full-service offering. Specifically, while you are given full access to the platform, their sourcing experts, who have conducted tens of thousands of events for hundreds of companies with a combined supply base that consists of over 10,000 companies, handle all of the event details for you which frees your organization to focus on high-level strategy and analysis. (Of course, if you need guidance in that respect, their sourcing experts are willing to work with you to identify the categories that are likely to generate the greatest ROI.) This approach has proved very successful for them and their customer base, and they typically drive an ROI of 10x for their clients within one year.

In addition to their sourcing expertise, they also have the ability to deliver a customized platform, as they built their entire solution in-house. This customization can go beyond just look and feel and include integration to external systems or new functionality and customized workflows based on organizational processes and best practices.

Platform-wise, they have a fully featured e-Negotiation platform with extensive RFX, Auction, Supplier Information Management (SIM), and document/contract management capabilities, which integrates with Microsoft Sharepoint for those who want a (collaborative) contract and document authoring solution in addition to the ability to track contracts and associated meta-data. And while the platform is not multi-lingual, it is multi-currency and they are integrated with multiple currency exchange data feeds. As a result, up-to-date currency conversions are always available.

With respect to e-Negotiation, or the RFX and Auction component, a buyer can use a templated workflow, capture as much cost and supplier information as they need to, and iterate through as many rounds as required. Plus, there are thousands of templates available to choose from for just about every category imaginable, built up by the Intesource sourcing team over the last decade as they captured the knowledge and best practices that materialized from the tens of thousands of events they ran, many with the global sourcing teams of some of the largest food, beverage, and retail companies in North America (which are the verticals they have particular expertise in). These templates contain complete workflows, customized RFIs, and customized bid templates with all of the relevant cost components. This allows bids to be broken down into unit cost, transport cost, duties & tariffs, utilization costs, warranty costs, etc. And, of course, the auction functionality is full featured and permits suppliers to be ranked against each item, group, or total award; the auction to be automatically extended based on last bid time; and bids to require a minimum decrement.

With respect to Supplier Information Management (SIM), you can capture all of the basic overview, classification, financial, product, service, and catalogue information associated with a company and augment it with feeds from D&B that include risk indicators and MWBE information. You can augment this with your own categories and fields of interest, and collect the data with the built in RFI capabilities. You can also get current marketing pricing on a wide range of commodities, as they have integrated data feeds from over 160 market exchanges.

The document / contract management module is a straight-forward repository- based solution that lets you manage as many documents, and as many kinds of documents, as you want with meta-data indexing and search. Creation capabilities are available through Sharepoint integration.

Based on their extensive workflow capabilities, which supports the hundreds of customized templates that are available across hundreds of categories, they have built a solid e-Sourcing Project Management Module that allows you to not only track your progress, but build your own customized workflows and category templates which can capture a significant amount of detailed information with respect to each task.

Finally, Intesource has an extensive SaaS interface for the supplier as well as the buyer, where the home-page dashboard — which shows current events, previous events, offered awards, accepted awards, pending tasks, etc. — can be customized for each supplier as well as the buyer.

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George Kimball’s Tips for First-Time Outsourcing Buyers

Over on Horses for Sources, Phil Fersht recently ran a great piece on practical outsourcing tips over a pint which contained advice from George Kimball that is definitely worth your time.

The article contained nine essential tips for first-time buyers which can determine the difference between success and failure, including these too-often overlooked tips:

  • Get good advice.

    Don’t try to do it all in-house, and, definitely, don’t just “turn it over to the experts”. No outside advisor will know your business as well as you do. You need to find an outside advisor you can work with who will work with you to create the best agreement for your specific situation, as there is no one size fits all agreement for outsourcing.

  • Prepare to manage the contract and relationship.

    Weak governance — too few people, without sufficient clout, and accustomed to managing operations, rather than relationships — remain the single, most common, avoidable error among customers. A team needs to be built before the contract is signed and needs to be involved in the deal making process.

  • Tone matters more than people suspect.

    Not only does collaboration require good working relationships built on candor, civility, and trust, but you need to remember that the people you will be working with not only come from a different culture, but, likely, one that is much older than yours. (For example, civilization in China and India goes back thousands of years. They don’t want to deal with “children”.) Furthermore, the world is changing, and in just a few years, the “low cost” countries of today will be the economic powerhouses of tomorrow.

For the other six great tips, check out George’s practical outsourcing tips over a pint and if you really want to dive in, he recently published Outsourcing Agreements: A Practical Guide.

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b-Pack: Packing It In for A Brave New World, Part IV

Three weeks ago, in Part I, we told you how b-pack, hot on the heels of Ivalua, had decided to cross the Atlantic and join in the conquest to bring the bohemian revolution to the world of Procurement and P2P with their extensive solution suite that actually closes the P2P loop. Then, two weeks ago in Part II, and last week in Part III, we expounded on some additional capabilities, relatively unique in the marketplace, that extended the basic value offering beyond basic P2P. Today we’re going to address one of the advanced P2P capabilities, the tightly integrated document management feature, administration, and the supplier portal. But first, a quick recap of the story to date.

Part I described the base b-pack platform that takes you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt of the goods (which can include asset tracking information), and the invoice, to payment, reporting, and supplier management. It covered the requisition, approval, receipt, invoice, matching, payment, and reporting cycle in detail as well as the solution delivery options that are available.

Part II detailed some of the integrated applications that build out the core capabilities to also provide the organization with expense and travel management, asset management, dispute resolution, and procurement business intelligence reporting and Part III addressed inventory management and its integration with asset management, budget management, fleet management, and internationalization.

Invoice management, which was initially discussed in Part I, is fairly sophisticated with a built-in invoice viewer (which can handle invoices in e-mail, EDI, and PDF formats, among others), auto-match capability (at the line-item level against original purchase orders), and multi-way match capability between purchase orders, contracts, and/or good receipts. The auto-match can be manually overridden (and maintains a running total of the reconciled amount against the entire invoice amount so the user can track her progress) and an invoice cannot be approved until it is fully matched against one or more purchase orders (at the line item level) and until all disputes against it are resolved. This goes a long way to insuring that incorrect and fraudulent invoices are never paid, which happens way to often when certain commodities, like office supplies, electronics, and storage space, are being purchased regularly and in large volumes.

Like reporting, document management permeates the system and allows each document to be tracked by way of associated meta-data which includes type, creation date, version, author, language, and other information relevant to the document type. In addition, (related) documents can be organized in a tree structure and a new document can be defined as sequential merge of a set of documents organized in a tree. Contract management is then built on top of this capability and allows contracts to be built up from component documents, where each component is a distinct section or clause, with its own meta-data information that aids in searching during contract construction. Through versioning, a user can quickly build a starting contract from standard clauses and then edit them accordingly using the built in word processor. The contract can then be output to PDF or Word, and if edits are made in the Word version (by the supplier), it can be imported back into the system as a successive version.

In addition, the document management system can store e-mail templates which are sent out when an action is triggered in the system, such as the transmission of a purchase order, the formal notification of a dispute, an automatic alert that inventory replenishment is required, and so on. These templates can be stored in multiple languages, and the proper version will be selected according to the language of the recipient. Furthermore, it’s integrated with the auto-translation utility which, although not perfect, gives you a starting template in another language, which can then be quickly reviewed and corrected by a native speaker.

Administration allows the user to define global display properties, procurement specific workflows, batch processes, usage rights by user, help file additions, and log access rights. Global display properties include price display rules, date rules, fonts, and themes. Procurement workflow properties include request limits, default payment modes, templates, and terms. Batch processes include data cache maintenance, undelivered e-mail management, user session management, database optimization, and invoice file management. The buyer can add specific information to the online help files for supplier use and for internal use. Finally, the administrator can also run data integrity checks, performance checks, link and reference checks, and database optimization.

Whereas some vendors build separate supplier portals for suppliers, which can greatly limit the functionality available to the supplier as most of the smaller shops can only devote so many developer cycles to portal maintenance, b-pack chose to build the supplier portal within the core application. The supplier portal is essentially the same application, but with access limited only to what the supplier is allowed to see and do. When a supplier representative logs in, she sees the same task manager that a buyer sees, which shows her to-do list, in-progress tasks, most recent system access, and available applications and allows her to access her reports, search for relevant information, and define the application settings she has control over. If she accesses the purchase order module, she sees the full workflow associated with the purchase order, but she is restricted to altering information related to acceptance and delivery, attaching notes, and initiating or responding to disputes — buyer side information is locked.

In addition, the supplier (vendor) master is tightly integrated with the core platform and allows the buyer to add and deactivate suppliers as required. For each supplier, the buyer can define basic identifying information, contacts, catalogues, currency, a description of the supplier’s product and/or service offerings, and portal access. The administrator can not only grant access to one or more supplier representatives, but choose what authorizations each representative is granted (in terms of invoice management, dispute management, catalog management, packing slip generation, invoicing, etc.).

In summary, the b-pack platform, which has been under development for ten years and which is very well thought out with respect to its goal of optimizing your back office procurement, provides a comprehensive P2P e-Procurement solution that also includes some very useful capabilities above and beyond the basic procurement cycle requirements that can provide significant additional value to many buying organizations, including the invoice management, document management, and supplier management capabilities described in this post.

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Here’s What Happens If You Don’t Write Your Contracts in Plain English

A while back, Dick Locke, who has an entire state on his side, wrote a great post on the importance of plain English in contracts that I’m betting many of you didn’t take seriously enough. To help you understand why this is very important, here’s a short video from The Temp Life that describes what might happen if you don’t follow his advice: