Now that everything is clear with the question, "Why do I need a vendor contract management system?" we can move on to why we are here. What can you do to create a perfect vendor contract management system that protects you from risks and legal issues?
Step 1: Identify vendor needs
What does your organization or business need? What products and services does your organization require, and who supplies them to your city, region, or country? Do the capabilities of potential vendors meet your needs? Before getting your hands on a vendor contract, you should cover the basics.
Also, when building your vendor contract management system, you need to find the best vendors you can rely on and sign a vendor contract with them. When looking for a supplier, you can pay attention to customer reviews, price-quality ratio, reliability, and timeliness of delivery.
Step 2: Create a vendor contract management team
Once you've identified your organization's needs, it's time to assemble your vendor contract management team. You'll need to recruit people from procurement, legal, and finance departments — or do it yourself if you have these areas of responsibility. This vendor contract management team should change vendor contracts, negotiate terms and conditions, and ensure that vendors meet their contractual obligations.
If you manage to assign people to handle vendor contract management, be sure to clearly define who has what responsibilities.
Step 3: Develop a vendor contract management plan
The third step in setting up successful vendor contract management is to develop a plan. In short, this is a list of processes and procedures that will be followed to manage vendor contracts, including how contracts will be reviewed and renewed, how disputes will be resolved, and how vendors will be evaluated. To learn about vendor contract management plan best practices, you will have to conduct research among businesses similar in nature and size to yours.
Also, when planning your vendor contract management, take into account the number of vendors you work with and the types of products and services you require.
Step 4: Create a vendor agreement
The fourth step in setting up your ideal vendor contract management finally involves working with legal documents. You need to create a vendor contract (or vendor agreement) that meets your needs.
In general, you can go two ways — hire a lawyer to do all the work for you or use a ready-made template. Which option is better?
Talking about hiring a lawyer, you can highlight such moments as convenience (because all the work will be done for you), reliability (because a lawyer knows exactly what to include in your contract), and costs (because a lawyer's work takes time and requires payment).
As for the vendor agreement template, it is a faster process (taking up to 10 minutes all in all, and you don't even have to leave your house) and cost-effective (templates cost ten times less than a lawyer's work).
It's up to you to decide, as it depends on your abilities or desires. No matter how you get that agreement, make sure it complies with the laws of your state.
Step 5: Implement the vendor contract management plan
When you have a vendor with whom you intend to work, a team, and a vendor agreement that outlines all of your requirements and rules, it's time to start the engine. Sign a contract with the vendor and specify regular reviews and updates, contractual obligations for vendors, and timelines that will help you resolve any disputes.
Step 6: Monitor and evaluate the vendor contract management plan
The final step, which is more like a marathon by nature, is monitoring how your vendor contract management process is working as you need it to. Here, it is necessary to regularly track key performance indicators, such as vendor performance and cost savings, and adjust the plan as needed.