Understanding the complexity of contracts and their lifecycles.

September 23rd, 2009

Many retailers today have no system in place for managing the contract management lifecycle or (CLM). As such millions in potential profit are lost each and every year.

Contract Management is the management of contracts with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing upon any changes that may arise during its implementation or execution.

Contract Management or (CM) can be summarized as the process of systematically and efficiently managing contract creating, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

A recent study found that 42% of enterprises indicated that the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks. In addition, nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk. Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements.

A significant problem with the life cycle of contracts today particularly in the retail space is a process called evergreening by which a contract is renewed automatically, often with less favorable terms. These evergreen contracts between two parties will automatically renew after the completion of the contract period. This will occur until the agreement is cancelled by either party. Without a system in place to monitor or manage contracts, evergreening can add unnecessary costs to businesses, often for millions of dollars as well as damage ongoing relationships between suppliers and buying organizations.

Ask you solutions provider how they can help you in this area.

We look forward to and appreciate your comments.

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