Contract-centric sourcing is an emerging paradigm in which companies use contract management software with robust sourcing capabilities to drive efficiencies, compliance and savings in the buying process.
The Icertis Contract Management (ICM) platform enables contract-centric sourcing through its sophisticated Sourcing application, from which buyers and sellers can easily submit bids and review contract terms within a single interface.
To better understand how a contract-centric sourcing event works, let’s consider a scenario in which a manufacturer needs to source parts from a direct supplier. We’ll outline the steps in the buying process and the advantages that a contract-centric approach provides.
Setting Up the RFQ
First, the manufacturer will need to set up the bidding round. From within ICM, it can upload an RFQ and select which suppliers it wants to send the RFQ to. Based on company policy, the bidding round will require two types of contracts: An NDA, which a supplier must sign before viewing the RFQ, and a fixed-price contract, to be executed as part of the final award. Icertis’ intelligent contract setup knows these business rules and automatically creates NDAs and fixed-cost contracts for each supplier invited to participate in the bidding round.
Advantage 1: What was once a manual process to get contracts set up for potential suppliers is now automated and occurs in parallel with the RFQ.
Sending Out the RFQ
From the application, the buyer can send the RFQ to its selected suppliers. Through the ICM Collaboration Portal, suppliers can sign the NDA and view the event. Because the bid is being viewed within the ICM environment, the NDA is easy to review and sign without having to switch applications.
Advantage 2: NDA submission and RFQ access become part of a single, easy motion, instead of separate processes that must be manually reviewed for compliance.
Responding to the RFQ and the Fixed-Price Contract
Once the NDA is submitted, suppliers can download the RFQ and fill in their bids, just as they would do in any buying event. Simultaneously, the supplier will also download the fixed-price contract and make any changes to the contract they will require to make a deal. For consideration, the supplier will be required to submit redlines (if they have any) in tandem with its bids.
Advantage 3: Contract language is presented to the supplier during the bidding round, rather than after the fact, and redlines are submitted as part of the overall bid.
Reviewing Bids and Redlines
If the supplier has changes to the contract, it can make the proposed redlines in Word and upload the marked-up contract to ICM, along with its price bids. ICM will automatically surface any changes to the contract for easy and intuitive review by the sourcing team. The buyer can then either respond to the redlines ahead of time (saying that they will disqualify the supplier if they remain, for example) or accept them and consider them when awarding.
Advantage 4: Contract redlines are surfaced and factored into the awarding decision.
Creating the Contract
With bid pricing and contract redlines all on the table for consideration, the buyer can award its contract for the parts. Through contract automation, the bids submitted by the winning supplier are amended to the already-negotiated fixed-price contract. This represents the final contract, which can then be routed to appropriate stakeholders for approval and execution within ICM.
Advantage 5: The final contract is an output of the RFQ process, rather than a document that must be constructed retroactively to reflect work already done. There is no risk of pricing terms not making it into the final contract, or contract negotiations derailing the buying process after a bid was awarded.
Sourcing, at its core, is a contract-centric process. Icertis’ best-in-class contract management software can help companies embrace a contract-centric philosophy in their buying process, thus securing many advantages.
To learn more about this new approach to sourcing, download the Spend Matters report, “Designing the Sourcing Process for Contract-ability: Why ‘Concurrent Contracting’ Is Crucial to Unlocking Maximum Commercial Value.”