Contract Lifecycle Management Challenges in Manufacturing Industry

When it comes to contract management, businesses face some common complexities however, some industries face a distinct set of obstacles such as the manufacturing industry. The manufacturing sector has evolved with the introduction of new technology, dynamic supply networks, and regulatory changes in the previous decade.

Companies in this industry are finding it tough to remain competitive and compliant while processing an increasing number of contracts, many of which are with third-party vendor contracts. Contracts for raw materials, vehicles, labor, technology, and other services are among other types of manufacturing contracts. Working with these contracts has the potential for problems to arise and disrupt the process. Such companies must be adaptable in order to preserve strong customer and supplier relationships, which are governed largely by contracts.

So, to further understand the need for Contract Lifecycle Management Solution in the manufacturing industry, we must understand the common challenges associated with the Contract Lifecycle Management process in the manufacturing industry. Here’s a brief into four common Contract challenges in the manufacturing industry:

Regulations and Non-Compliance

In the manufacturing industry, contracts are often inefficiently integrated with systems such as ERP, CRM, and P2P which in turn hinder compliance. Contract managers are in charge of making sure that all of the required compliance clauses are included in the contracts. These should take into account provisions specific to the country or state in which you operate. Furthermore, they must verify that their company’s employees and executives adhere to the contract’s conditions from time to time manually. Regulating compliances and managing obligations manually becomes tedious and inefficient tasks.

With a contract lifecycle management system, drafting becomes faster and more efficient features such as contract templates and clause libraries.

Standardization and Centralization

One of the primary problems in the manufacturing industry is the centralized storage and dealing with ad-hoc contract drafting processes to propagate contract terms and contract templates throughout the business. Contract storage is usually spread across multiple departments and systems.

The standardization of contracts entails uniformity in structure. Standardizing contract wording and format has various advantages: cost reduction increased productivity, and easy access. Companies can save time creating and evaluating contracts by adopting a contract management solution, allowing their employees to focus on strategic goals.

Supply Chain Challenges

Since the manufacturing industry is heavily reliant on vendor and supplier relationships, it becomes crucial to maintain these relationships. Such a relationship is defined by the contracts. When the extent of the supply chain increases globally, the need for better contract management between these supply chains also becomes necessary. The source-to-contract process is frequently fragmented, making it difficult to assess supplier risk and follow the performance. Sales and sourcing take place separately, without the tools to successfully deliver the rigorous contracting that is required to guarantee that proposals are structured properly for new customers and vendors.

Such contracts must be managed on an ongoing basis throughout their duration. A contract management solution can enable designing a strong contract for a company’s supply chains and manage them effectively throughout their lifecycle.

Tracking and Renewal

Contract managers must keep a close eye on contracts that are due to expire or are pending renewal in the organization. A missing expiration or renewal date can lead to various issues, such as penalties, charges to pay for the renewal, etc. In “product-as-a-service” scenarios, lack of visibility also makes it impossible to track responsibilities and SLAs.

Contracts get delayed during the process, which is a common error made by businesses. Contract turnaround times get slow as a result of these delays. Companies may even lose business as a result of this.

Delays can occur for several reasons, including trouble locating contract templates, manually making modifications to templates, red lines returned from the supplier in email threads that get difficult to find and track, or even an approval bottleneck. In this case, contract management solutions provide tools to speed up contracts and data to help identify any potential bottlenecks.

CLM Automation for countering challenges in Manufacturing Industry

Contract administration is a complex and ongoing process. It comes with its own set of hazards that might disrupt business operations. It does not, however, have to be a painful procedure. These issues can be easily managed with the implementation of the right Contract Lifecycle Management solution.

CLM Solutions can make a major difference in Obligation and Compliance management via automated tracking and reminders, along with authoring and Negotiations. Businesses in the manufacturing sector can benefit greatly in terms of efficiency and vendor/supplier relationships by implementing a Contract Lifecycle Management Solution.