Has your business ever struggled to procure materials on time to balance the demand-supply scales?
Procurement strategies can be tricky to master; however, procurement can be made simple with contracts that include detailed guidelines.
Procurement contracts need to be drawn up such that they cover every need your business may have from a vendor. It’s important to use strategies and methodologies that helps with procurement contract creation to avoid vagueness and disagreement.
A CPO Compass survey highlights how 59% of procurement functions aim to adopt technology to achieve better efficiencies.
The epitome of technological advancement in procurement can be seen in custom-designed procurement contract management software.
With the help of no-code platforms like Hubler, it is possible to design procurement contract management and automation software that resonates with a business’s needs.
Let’s understand procurement contracts in depth.
Procurement contracts are documents that legally binds the buyer and the seller. A procurement contract contains the terms and conditions regarding:
A procurement contract in place, removes any ambiguities. Hence, it becomes easier to stay compliant with a buyer’s requirements.
The written word with a signature establishes a good foundation for the promissory relationship between the buyer and the vendor for reliable future deals as well.
Procurement contracts set the right expectations between the buyer and the seller. They must, thus, contain certain essential elements that clarifies the protocol to avoid any dispute or confusion.
Listed below are the seven essential components of procurement contracts:
There are three kinds of procurement contracts that businesses execute with their vendors:
These procurement contracts are the most common types of contracts.
As the name suggests, the price of deliverables agreed upon during the signing of the contract remains fixed throughout the contract term. This remains as-is regardless of the fluctuations of the price on the market.
These contracts are the easiest to manage and are, therefore, popular. However, for vendors, they may be limiting when prices of raw materials inflate.
There are three sub-types of these contracts:
This contract favors the buyers more than the sellers.
Here, the buyer agrees to shoulder the associated expenses required to manufacture a commodity, like equipment, raw materials, staffing, etc.
The seller then incentivizes this arrangement for the buyer with a percentage of the profits. Some arrangements even include a clause where the buyer promises to purchase a fixed minimum quantity of the goods.
The seller is responsible for manufacturing the goods according to the buyer’s specifications.
Time and Material Contracts
In time and material procurement contracts, the buyer agrees to pay the supplier for the time and materials input for manufacturing the goods.
However, there is an upper limit specified in the contract regarding the time and materials to avoid overcharging and fraudulent claims by suppliers.
These contracts are best suited for complex projects that require some flexibility to execute well.
Employing procurement contract management software helps businesses streamline their entire procurement ecosystem with just one software. You get the following benefits:
With procurement contract management software, it is possible to automate compliances and set up alerts/notifications for upcoming deliverables. It helps both parties stay in step with timelines and requirements.
With procurement contracts in place, buyers can reduce the risk of overspending with inflation clauses in place. These contracts also help streamline the payment timelines to vendors for establishing good work relationships with them.
Automated procurement contracts help your business with:
Businesses do undergo audits every now and then. Having procurement contract management software in place helps to speed up the entire process. By making the data easily accessible and centrally available, audits can be smoothly executed.
If your business custom-creates procurement management software, it is possible to incorporate data analytics into it.
With data analytics, your business can identify the bottlenecks in the procurement contract processes, giving you an idea of which aspects to streamline to improve productivity.
Procurement contract management software makes it possible to automate workflows, automate approvals, generate invoices, etc. This helps with reducing the turnaround times overall.
Procurement contracts can be a pain to manage well. The best course to take is to create your own custom procurement contracts management solution.
Hubler, a leading no-code platform, helps your business get started by creating the right tools for your procurement operations. Hubler empowers you to:
...and much more. For more information on how Hubler can help with procurement contracts, visit this page .
