The Procurement and Supply Manager's Desk Reference, + Website, 2nd Edition

CHAPTER 10

Contract Formation and Administration for Optimum Supplier Performance

Contract administration officially begins at the time the contract is signed, although the department's involvement may extend into the earlier contract formation phase. Administering contracts to ensure supplier contract compliance and maximum performance is one of the most important responsibilities of the Procurement Department.

The central focal point for contract compliance is meeting the requirements of the internal customer. Procurement departments do not usually have the resources to closely manage the hundreds of suppliers to the organization, nor would it make sense for its staff to even try to do so, since rarely will the Procurement Department be staffed with the same level of expertise as the using or customer department. Instead, you can be best served by relying on your internal customers, those employees and departments directly affected by the supplier's performance, to provide day-to-day operational information such as quality evaluations and on-time delivery reports. Using this information enables you to conduct periodic business reviews with key suppliers to help them understand areas for improvement and how they can best achieve stronger performance. This is the essence of supplier relationship management (SRM), a term coined to describe the activities related to monitoring and improving supplier performance. Integrated with the broader picture will be the Procurement Department's ...