In the article “How Contracting Can Help Companies Win in a Low Prices Commodity World”, we said that deal teams benefits from being cross functional. So what does that mean?
Rateability of volume, flexibility in uplifts, payment terms, payment method, means of transport, certification of product standard, reliability of delivery, response times, wait periods, ability to get certainty on volume, time, who takes the risk etc. These are all big items to be considered and without the experts inputting into the deal up-front, our experience and studies of leading organisations shows that the deal will be less than optimal.
A good contract should bring considerable value to both customer and supplier organisations. Ask yourself the following questions:
- Is your organisation ready to deliver the value from day 1?
- Will your customer or supplier be set up to maximise value from day 1?
- Best practice is to start the contract in the same vein that you want it to continually operate. Is your full organisation ready and do they understand the objective and terms of the deal?
- Is there one person in the organisation with enough insight into all the competing issues in the offering or will you benefit from a cross functional team perspective?
- Do you know the supplier or customer well enough to throw up options or respond to options than may not be standard but may be of value?
- Who needs to know about this contract? HS&E, Legal, Finance, Human Resources, IT, Warehouse, Tank Farm, Logistics, Quality Control, Production, etc.
The more of your experts that are included up-front, the greater the likelihood of the contract delivering the expected value from the start.
If not managed well, misalignment with the customer and supplier will results in claims and disputes during operations or lengthy negotiations. Aligned objectives on mutual value creation will ensure long lasting contractual relationship. The cross functional team helps to understand needs, want of the customer and supplier and competitive advantages of your organisation.
Give the cross functional team a go. You have them on-board for a reason, so why not start getting more value. The better the representation on the deal team – the faster and clearer the communication and buy-in across your functions and the greater the likelihood of achieving the desired contract objective.