Contract Lifecycle Management in Procurement
Challenges in Procurement:
The foundation of every supplier relationship is a binding agreement in the form of a contract. Continuous transparency and precise knowledge about these contracts and their respective contents is key for assessing options, opportunities as well as risks and therefore indispensable for the procurement department of an organization. Various discussions with our clients confirm our experience that the procurement department faces tough challenges when it comes to contract management:
“Price lists, deadlines and other relevant content of our contracts are not automatically integrated in the existing system landscape”
“Due to a lack of transparency, analyses are often incomplete and very time consuming”
“We need legal know-how within the contract creation process, but the legal department is out of capacities”
“The monitoring of my contracts is inefficient and is binding resources”
If the procurement department wants to be involved in the creation of every contract without a standardized procedure in place, even simple contract requests may exceed its existing capacities. In the case of complex business relationships, lengthy negotiations and the recurring, manual review of changes in the contract draft are binding resources and impact or at least delay subsequent activities of the value chain. Is the procurement department bypassed i.e. not involved in the contract creation at all, already negotiated conditions, discounts or existing master agreements often remain unused.
Additionally, the use of outdated templates or the unawareness of legal requirements pose substantial risks to the entire organization.
Once a contract is concluded, its execution needs to be monitored in order to be able to guarantee that services are delivered, rights claimed, and obligations met within their respective deadlines. There is a lot of potential within the contracts of an organization, especially when it comes to the improvement of business relationships, which can only be achieved if the conclusion of contracts is formally managed.
The Solution: Holistic Contract Management
System providers understood these challenges and developed several different solutions. The systems vary both in terms of their focus area (sell-side, buy-side, enterprise-contracts) and in terms of deployment options (on-premise, cloud, hybrid). The offerings range from stand-alone software systems (e.g. KPMG CLMS, Icertis) to CLM modules – integrated into the ERP System (e.g. SAP ECM&A) as well as procurement platforms with fully integrated contract management capabilities (e.g. Coupa CLM). The systems also vary with respect to functionality as well as associated costs for implementation and licenses.
We provide holistic advisory in the management of the entire contract lifecycle from a procedural, organizational, legal and technological perspective. With our dedicated KPMG contract management approach, we not only support the selection of the most suitable system, but also help in defining requirements and designing of necessary processes and governance structures beforehand. Acting as the intermediary to the selected system provider we ensure the seamless implementation of the system solution and the subsequent operationalization of the processes. We help the procurement department to minimize costs and risks while at the same time increasing efficiency and effectiveness of relevant processes as well as quality and transparency of the contract landscape by:
• gaining control over the contracts concluded in the organization,
• handling contract requests better and entering contract negotiations with a strengthened position,
• increasing efficiency of key activities within the contract lifecycle such as the creation and monitoring of contracts and
• achieving full transparency in the contract landscape.