A Guide to Contract Management in the Manufacturing Sector

A Guide To Contract Management In The Manufacturing Sector

The manufacturing industry faces unique challenges in managing contracts. Due to how the manufacturing industry branches out into other sectors like business and trade, manufacturing organizations deal with a high volume of contracts at any given time.

Adopting a cloud-secure, digital contract management software solution to support your organization is an intelligent decision that provides numerous competitive advantages. A couple advantages that contract management software offer include the following:

  • Cloud-secure and accessible storage in a digital contract repository
  • Customizable, automated notifications and reminders
  • Reporting features to increase visibility and insights of your contracts
  • Vendor management portals and vendor scorecards
  • Compliance monitoring and obligations tracking

The manufacturing industry faces unique challenges in managing contracts. Due to how the manufacturing industry branches out into other sectors like business and trade, manufacturing organizations deal with a high volume of contracts at any given time. With massive contract portfolios and associated documents, contract management can quickly become a source of delay, miscommunication, and lost opportunity. One small error in the contract management process can result in enormous financial repercussions, and many organizations continue to rely on traditional, manual contract management methods using emails and spreadsheets, and these methods are simply ill-equipped for the incredible demands placed on manufacturing organizations. Overseeing the agreements made with hundreds of thousands of suppliers globally can prove to be a complicated task, especially given the contractual obligations associated with distributors, vendors, and suppliers.

The introduction of technology has transformed modern systems and procedures within the manufacturing sector. Throughout any given manufacturing company, there is a constant pressure to increase productivity and expedite processes wherever possible in order to manage more contracts and withstand higher demands with success. One area within these companies that can be transformed for the better is contract management. With a contract management software solution, manufacturers can gain control of their contracts, increase spend visibility, and gain valuable insights into how vendors are performing at any time.

Changes in the regulatory landscape, ensuring compliant practices, and the complexity of supply chain management are cause for concern when it comes to contracts in the manufacturing industry. For best results, manufacturers should emphasize maintaining positive partnerships with their vendors and suppliers, and this means their contracts must be a main priority.


What does contract management in the manufacturing sector look like without the help of contract management software?

Without contract management software, manufacturers will experience difficulties in authoring contracts rapidly while maintaining quality and accuracy. In addition, traditional contract management leaves companies vulnerable to letting things slip through the cracks, as maintaining visibility and transparency into every detail manually is unrealistic. In essence, traditional contract management in manufacturing can result in inaccurate, noncompliant contracts, decreased contract portfolio visibility, missed deadlines, avoidable delays, and increased costs. Conducting contract management procedures manually complicates the ability to collaborate with others in different departments on contracts, resulting in even more delays, higher production costs, and the potential for damaged supplier or vendor partnerships.

Contract management software for the manufacturing industry

Cloud-based contract management software supports teams with advanced, collaborative features to improve internal communication and contract monitoring during every stage of the contract lifecycle. These solutions offer a simple approach for manufacturers to improve their systems and increase the security of their documents, providing insights and tools to increase contract management efficiency. Users can self-service on their contracts with flexible, automated contract workflows to expedite each phase of contracting. In addition, a software-supported approach to contracting lends itself to optimized compliance management. A comprehensive library of preapproved contract templates and clauses also assist contract managers in rapid contract drafting and in contract reviews, which is particularly helpful for supplier and third-party agreements. Data analysis and risk management is made easy with a digital contract solution, where users can retrieve vendor performance data from previous contracts and assess supplier contract risks. Monitoring contract performance with milestone and obligation tracking ensures that deadlines are met and that third parties follow through on contractual terms. With customizable, sharable reports, organizations can maintain their pricing structures and inventory with previous contract performance data at their fingertips so they can make the most well-informed decisions.

Centralization of contracts

If you currently store your contracts and associated documents in shared drives, as physical hard copies in filing cabinets, or within email chains, then you run the risk of losing your contracts and incurring significant financial damages. To better manage your contracts, a contract management system can help you store, organization, and efficiently retrieve your contracts. with customizable filters and text-based search capabilities, you can find exactly what you need, when you need it. A digital contract repository doesn’t just store your contracts, it helps eliminate human errors, increases speed and efficiency, and reduces the potential for avoidable bottlenecks when contracts go amiss.

Support for supply chain management

Supply chain management is essential for manufacturers to stay aware of available supplies of raw materials. Companies must develop agreements with their suppliers, as failure to procure materials for manufacturing can result in losses. A large contract portfolio means the importance of accurate contract monitoring and compliance management are at the forefront. To effectively manage supply chain procedures, a contract management solution can support teams to build, collaborate, and finalize contracts with ease. This streamlines tasks relating to supply chain management, like ensuring trade terms and material prices are correct.

Compliance management

Compliance management is an essential component for manufacturing companies to effectively oversee their contracts. A noncompliant contract is destined to fail, so ensure that your contracts align with terms, clauses, provisions, and conditions at all times. The fastest way to damage your company’s reputation is by failing to adhere to contract terms and conditions. In the context of the manufacturing sector, we recommend learning the trading laws in the locations you have business deals with, and to learn about various legislations in these places. Your legal department should gain a full understanding of the terms of trade, laws, and privacy policies pertaining to every agreement, and a contract management software solution will only support this aim.

Increase productivity

Productivity influences profitability, especially within the manufacturing industry. Contracts must be continuously monitored to ensure current and new developments are effectively managed, where a CMS solution can support teams in meeting contractual requirements and addressing contract responsibilities in a timely, standardized manner. In addition, contract management software is built with detailed contract management dashboards to give you detailed insights on contract performance metrics. Manufacturers oftentimes face specific challenges during the contract lifecycle that delay contract execution. However, contract management software can eliminate many of these delays through standardizing and automating processes.

Addressing the demands placed on manufacturers

The global marketplace operates at a faster rate than ever before, necessitating faster turnaround times and rapid contract execution. Today, manufacturers must stay up to speed in their commercial relationships, as clients desire faster contracts and more of them. Companies largely rely on their suppliers in order to meet deadlines and fulfill contracted obligations. Oftentimes, a manufacturer will link multiple contracts to outline their services with multiple subcontractors to fulfill obligations. And while this method can help manage supply chain risks, it can be hard to maintain, especially without a single, centralized platform. To track contracts and their associated terms and obligations can be an extremely time-consuming process prone to human error and inaccuracies – especially when manufacturing companies manually complete contract tracking. Leveraging email communication to learn about contract performance and status updates is one way that delays the contract lifecycle. For optimal contract speed while maintaining contract quality and compliance, manufacturers need to adopt a digital contract management platform.

Digitization of the entire contract lifecycle

Manufacturers can leverage automation to mitigate risks, systematize the contract lifecycle, cut costs, draft contracts on any device, and save time. In addition, electronic signature integrations assist sales, legal, and procurement departments with a rapid and secure contract signature phase. From the contract intake and request phase all the way to contract execution, renewal, and expiry, contract management can be entirely digitized and secure within a cloud infrastructure. Custom, flexible contract workflows enable teams to automate contracts and increase compliance. Because contract management responsibilities can be completed digitally in a cloud-based platform, manufacturers must be able to maintain the speed of their competitors who have adopted intuitive, productive CMS solutions.

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Manufacturers can leverage self-servicing contracts

Self-servicing contract workflows remove the unnecessary obstacles often encountered during the contract lifecycle. From contract negotiations, to reviews and approvals, self-service contracts empower teams to easily complete contract management tasks on their own terms – freeing up time for all involved teams. This means that procurement, legal, sales, and operations can expedite contract lifecycles by working in sync. Drafting contracts from preapproved contract templates and clauses means that legal can spend more time on reviews, for example.

A changing landscape in risk management

Risk management will always be a major priority of any manufacturer. However, maintaining compliance has become increasingly more difficult due to new regulations and the penalties associated with failure to comply. Today, manufacturers are demanded to know all regulations that may exist for any given service, good, or product in multiple locations/jurisdictions. To this end, a manufacturer is expected to regularly monitor their entire contract portfolio to assess if there have been any regulatory changes or newly introduced regulations. To monitor the regulatory landscape manually is a time-consuming task, so a contract management software solution can help.

Challenges that manufacturing companies consistently face

The manufacturing sector is complex and competitive. To effectively design products from raw materials and to source the materials needed from a variety of sources globally, manufacturers must develop an optimized, reliable supply chain. To successfully collect all the materials, resources, technology, and labor needed, manufacturers must execute numerous contracts. With an enormous contract portfolio comes enormous responsibility. However, contract management software can support manufacturers in overcoming challenges and stepping up to the plate to maintain efficiency.

When managing the supply chain, it can be difficult to solve logistical problems spanning multiple time zones. It can also be hard to address everchanging demands by the client, to deal with supply quality control issues, and to allocate additional funds for higher priced commodity items. You can never assume that raw materials are set at a fixed price, so business costs can greatly fluctuate according to uncontrollable factors. However, risks can be effectively mitigated by working with reliable suppliers and vendors and then by designing accurate, quality contractual agreements with them. A contract management system allows you to store and manage your supply chain contracts, maintain compliance, and increase performance of supply chains.

Once a contract is signed with a supplier or vendor, you must continue to monitor contract performance to determine if you’d like to renew the agreement. To do so, it’s necessary to analyze the productivity and results of your contracts and to learn what they are costing your organization. We recommend that you learn the value of each agreement by calculating your return on investment for each so you can pinpoint specific issues and decide which contracts are most favorable to renew.

Contract management software supports you in doing just this. Manufacturing companies can leverage customizable reporting and data analysis capabilities to learn which contracts pose the most problems and which contracts pose the most potential for growth and return. With archives and historical data, you can learn from past agreements to make well-informed business decisions moving forward. This empowers you to conduct accurate, detailed business forecasts so that you can meet future needs with all the data at your fingertips.

Compliance concerns

Manufacturing companies must consider risk management and compliance in order to maintain successful operations in numerous locations. Some of the compliance concerns that manufacturers must consider include health and safety policies, environmental regulations, antitrust laws, IT and privacy laws, fair competition laws, and many more. To address all of these compliance concerns is a massive undertaking; however, manufacturing companies can do so successfully with the assistance of contract management software. Standardized contract templates and preapproved clauses support manufacturers, especially when regulations can change at any given moment. In this scenario, you will have to make changes to your contract templates to maintain compliance – and contract management software is the best solution to do so.

Disruptions in the supply chain also pose major difficulties to manufacturers. Things like labor shortages and factory closures present instability to manufacturing, leading manufacturers to change their sourcing strategies and diversify their portfolio of vendors, renegotiate agreements to minimize changes in pricing, or to increase prices (typically as a last-ditch effort). Manufacturing companies ill-equipped to swiftly address these disruptions and the problems associated with them need an additional option to help them navigate through the uncertainty that is an unstable supply chain. Enter contract management software.

Manufacturers gain flexibility and agility with a CMS

Flexibility and agility are essential for manufacturers to be successful in supply chain management. This means that they must proactively address the dynamic, ever-changing supply chain. Digital contracts are proven to increase operational efficiency, making a digital contract management solution an excellent choice for manufacturers to oversee their contracts especially when there are supply chain disruptions. These solutions empower manufacturers to be agile in their response to a changing landscape.

Faster vendor onboarding process

Onboarding can be a time-consuming, rigorous process that requires numerous steps. However, effective contract management can help manufacturers design and execute contracts faster than ever within just days as opposed to weeks – an often-overlooked competitive advantage.

Efficient master service agreements (MSAs)

Conducting contract reviews, approvals, and negotiations requires the communication and collaboration between multiple parties. With contract management software, manufacturing companies can leverage intuitive, collaboration-friendly portals to negotiate their master service agreements with ease. Redlining, in-document commenting, and other editing tools support an expedited, accurate negotiation process.

Increase contract accuracy

With automated contract workflows, your team can route and automate the sequence of steps each agreement follows. When there are drastic supply chain changes, contracts will likely need to reflect them. Due to the standardization provided by configurable contract automation, you can remove much of the hassle associated with paperwork while ensuring all details are available to your internal teams like legal and procurement to complete tasks at faster rates. You’ll also find that automation inherently helps reduce manual errors with required data entry fields. This reduces the need for sifting through your contracts numerous times to locate errors and incomplete requests. It’s clear that a contract management system is a key tool to help manufacturing companies of all sizes maintain an effective strategy towards supply chain management, especially given today’s constantly evolving geopolitical framework.

Best practices for contract management in the manufacturing industry

It’s necessary to understand the objective for each contract. What is the main purpose of your current contract portfolio, and how will they meet the needs of your organization? Which contracts are most valuable and which vendors and suppliers consistently perform well?

We recommend that you review past contracts to see where previous contracts went wrong. This equips you with the knowledge to avoid the same problems moving forward, allowing you to clearly communicate concerns with vendors and suppliers.

Adopting a contract management system inclusive of a cloud-secure digital contract repository will help you maintain all agreements, where you can categorize them by supplier and vendor. A software solution also allows you to configure automated reminders regarding your time-sensitive contract responsibilities and deadlines so that you can maintain a proactive contract management environment. This also allows you to keep tabs on agreements with approaching expiration dates or auto renewal dates. A digital repository makes it easy to rapidly retrieve exact contracts within seconds due to text-based search and custom filtering capabilities. From your repository, you can share contracts with authorized users and external parties while maintaining full security.

Another best practice in contract management within the manufacturing industry is to document where delays occur, what leads to them, and how to resolve them. This concept of monitoring performance to assess errors and areas of improvement lends itself well to improving negotiations as well, where you should always clearly communicate in which ways an agreement can be improved and how you can mutually problem solve together.

Managing suppliers requires swift action when something goes amiss, and it takes substantial effort to maintain long-term, positive relationships with suppliers. Ensure that you maintain consistent, clear lines of communication with your suppliers to check-in and make sure things are running smoothly. This way, you can work together and navigate through any issues as they arise.

Learn more about the Dock 365 Contract Management System.

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Disclaimer: The information provided on this website is not intended to be legal advice; rather, all information, content, and resources accessible through this site are for purely educational purposes. This page's content might not be up to date with legal or other information.

Written by Lindsey Paulk

Lindsey Paulk is a Content Writer in Jacksonville, Florida that specializes in digitally communicating all-things contract management.
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Reviewed by Naveen K P

Naveen, a seasoned content reviewer with 9+ years in software technical writing, excels in evaluating content for accuracy and clarity. With expertise in SaaS, cybersecurity, AI, and cloud computing, he ensures adherence to brand standards while simplifying complex concepts.

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