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Independent Software Vendor since 2001
consulting, software design and implementation development of turn-key software solutions support throughout the entire software lifecycle

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Software and services for the logistics industry:
Freightrate and surcharge management, Quotation, Allocation management, Tender management for Sea FCL and LCL, Air and Land transportation

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consulting, education and mentoring:
highly specialized and experienced in Oracle databases and systems managed services: from rack to application, Oracle Systems and Storage sizing and resale

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Christian Sorensen
Global Head of Marketing & Sales
Key to Successful Contract Management
Contract management refers to the management, negotiation, execution, performance, modification and termination of various contracts that a company enters into in the course of their business.

In the case of shipping and freight, contract management entails negotiation and finalizing of ocean freight contracts, haulier contracts, port and terminal contracts, forwarder contracts and many other vendor contracts.

For any contract to be successful and beneficial it needs to be managed properly and effectively.


Setting up a proper contract

Due to the pressures of modern day business and especially the current depressed conditions under which shipping and freight industry operates, all sectors of the industry are facing increasing pressure to reduce costs, achieve optimum performance and maintain financial integrity and dignity.

The fluctuations in the freight industry, the roller coaster ride of the oil prices, the inconsistent cargo volumes all of them make contract management that much more difficult and crucial.

Due to the above, there is a growing need to automate the contract management process in order to maintain compliance and there is also a need for a formal and structured contract management process.

Whether you are a SME (Small to Medium Enterprise) or a large conglomerate, all organisations in the freight industry will enter into a contract with someone at some stage.

The cost of not managing a contract properly may be far more damaging to the company than the initial time and investment made in setting up the contract.

Best practices in contract management
Some of the best practices to adopt when it comes to contract management include:

1)    Understand the nature of the business to create a suitable contract
Unless you understand the full nature and impact of the business, you will not be able to enter into a proper contract that is suited for that business. It is crucial to remember that not all contracts fit all businesses.

2)    Nominate the correct person
Whoever handles the contract management process has to have their finger on the pulse of the market, their business and its characteristics. They should be an expert in the subject matter so that they are aware of the do’s and don’ts in a contract.
Certain contracts may require special understanding and specific skills (such as a project cargo movement). In this case, the company will surely require the expertise of someone who has handled it before and you may need to call upon them to manage that specific part of the contract.

3)    Stay upto date with the market
It is important to stay upto date with the market and identify any weaknesses or pressure points that may have not been considered at the time of the signing of the contract. Example if a contract is arrived at on the basis of transit via Red Sea and it later turns out to be impossible due to piracy issues or other such exigencies.

4)    K.I.S.S (Keep It Simple Stupid)
Ensure that the contract you enter into with your service provider is simple yet comprehensive. Many of the contract makers have a penchant for using a lot of jargon which may complicate matters when it comes to contract performance and analysis.

5)    Identify the risks in a contract
Just like a business, contract management also has its risks and it is important to identify these risks and patch it up early enough before there is any damage. For example, your freight validity terms on the contract could be a serious matter if it is not noted and monitored timeously.

6)    Regular audits
It is not enough just to negotiate a killer contract and secure the best rates and services. It is also important to ensure that as part of contract management, regular audits are done on the contracts. Are the deliveries being made on times, are the invoices being raised on time, are the correct invoices being raised.?
Such audits should be at the core of your contract management and must be effectively followed.

It is important to remember that a contract is a legally binding agreement between one or more parties and that all parties must adhere to the terms and conditions of this binding agreement.
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A successful contract management can be achieved only if the obligations of the contract is realised and also the framework of the contract is understood.
It is important to ensure that contract management is done through all phases of a contract – planning, creation, association, execution, administration upto closeout or renewal of the contract.
Find Out More
Visit our website portrix-ls.de to learn how we can help you improve the contract management process through technology. While you’re there, be sure to schedule a demo for our GPM solutions including rate management, quotation management, ocean schedules and more.