Food and Beverages Industry and the risk of Contract Lifecycle Management
Sept 15, 2019 By Prasad Varade
Food and beverages industry continuously monitored by reforms and regulations. They are facing multiple challenges like dealing with ever increasing compliance requirement for all relevant including Food and Drug Administration (FDA), United States Department of Agriculture (USDA), FSSAI, Food Standard Agency (FSA).
In order to stay competitive and compliant with the ever changing regulations the food and beverages companies need to become more agile and stay close to both your customers and suppliers. And at the core what connects you with them is contract. Because contract defines the terms, deliverables, restrictions and business relationship between you and customer and suppliers.
F&B industry largely dealing with high risk and high volume contracts like vendor and suppliers agreement, dealers and distributor contracts, logistics, insurance and many other commercial contracts.
1. What is the current status of a contract -is it drafted, reviewed, approved, signed or If its stuck somewhere, If so then where and with whom ?
2. Which contracts are about to expire or renew ?
3. Where is the contract I need, and is this the current version - and what terms we have negotiated in negotiation phase ?
4. Is the contract I am drafting using approved language and terms ?
5. What contracts have clauses and terms that pose a higher level of risk ?
6. How many of our suppliers account for 80% of spend ?
7. Which are our key contracts by value/business unit/geography ?
8. Which contracts are renewing in the next week/month/quarter/year ?
9. Do we have multiple suppliers providing the same goods or services at different prices ?
10. Are we on track to realise all the agreed benefits from our contracts ?
Being unable to answer these questions like opens the door to some serious financial loss and business risks like,
• Lack of compliance, which can lead to penalties.
• Missing expiration dates that result in auto- renewal.
• Losing contracts or associated documents due to broken links, file renaming, indiscriminate filing, or employees leaving.
• Delays associated with tracking down documents, verifying versions, and haphazard searches for data within documents.
• Loss of revenue due to poor contract governance and performance monitoring.
Automate Contract Life-Cycle:
CLM solution will automate different stages of contract life-cycle from drafting the contract to get it reviewed, approved and signed through the integrated electronic signature technology. CLM solution gives you the clear picture of contract current status and if it stuck somewhere then why and with whom. It reduce the contract lifecycle time by 80% and get the deal closed faster.
Real-time visibility and tracking:
It is important for sales teams to manage contracts not just during the authoring, reviewing and sign-off stages but also post sign-off. Integrated contract lifecycle management systems provide a real-time view of all key contract information in the form of a dashboard. All approaching deadlines and other key data enabling sales ops teams to take necessary steps on time. Sales operations are also alerted with triggers and reminders of any renewals ensuring ample time for negotiation.
Monitoring cost saving opportunities:
Contract management tool gives a holistic view of all buy side contracts as well with sales side contracts so the respective contract owner can identify re-negotiation opportunities and unwanted renewals which can be terminated to save organization contract.
Streamline contract performance monitoring with periodic review:
This is another crucial, and often overlooked part of the contract management process, particularly if you dont have dedicated CLM staff to oversee the process. Tracking the performance of contracts to ensure maximum returns is crucial for all organizations. With CLM solution you can set performance monitoring task and milestones for contracts and receive notification when the event triggered and make sure the agreed deadlines are meets and terms and conditions are followed.
Compliance and Risk management framework:
Contracts come with a large number of complex regulations and obligations and any breach of these could lead to heavy financial and reputational losses. These state, national, and federal regulations change and update all the time and the same needs to reflect in the contracts to stay compliant. This makes monitoring contracts to ensure full compliance a necessity across a contracts lifecycle. Reviewing hundreds of contracts for compliance is next to impossible if handled manually but equally hassle-free with Contract Management Solution.
Centralised repository for all contracts:
Data is truly the bloodline of Food and Beverages Industry and Centralization is the backbone of your contract management process, supporting and enabling all the other areas of contract management. Without a centralized location for documents and data, important functions such as reporting, auditing and analysis become nearly impossible. CLM software enables you to establish a centralized electronic repository for all of your contracts, making them easy to manage and enable you to filter out the contracts the way you want.
Good Contract Development and Management could improve profitability by the equivalent of massive 9% of annual revenue.
- International Association for Contract & Commercial Management (IACCM)
Outsourcing suppliers found that without close contract governance, businesses stand to lose up to 40% of a contracts value.
- A KPMG Survey
65% of Legal professionals identify time lost on administrative tasks as their biggest pain point according to a global legal servey.